2020 has been a wild ride, and it’s not over yet. While the oddities unfolding this year have been mostly unwelcome and tragic, a few have been more positive and less depressing.
For instance, the shift to working from home has proved to be a big success for businesses and a big hit for their employees. Companies are cutting back on operating costs while workers are spending more time with their families.
Another example of hard-to-come-by good news in 2020 is the healthy state of the real estate market, particularly the luxury housing sector. Given that we’re in an economic recession, it’s an odd but welcome turn of events.
Let’s take a look at why the current economic recession hasn’t wrecked the housing market:
Investors haven’t lost faith in real estate investment opportunities. Rather than pull out of the market, which typically happens in a recession, real estate investors are sticking to their investments. Some developers are even putting their money into real estate investment trusts, a strong indicator of investor confidence going forward. The result is billions of dollars of investment capital acting as a backstop for the real estate market as it moves through seemingly uncertain times. That kind of market security is unusual for a recession.
Home has taken on new meaning in 2020. Since working from home enables people to spend more time with their families, folks have found their ideal work-life balance in recent months. However, spending so much time at home has many men and women realizing how confined their houses and apartments can seem when everyone is there. They’re interested in making home a more comfortable place to live, especially if it continues to be where we work and our kids learn. The result is continued demand for new housing, which has kept the real estate market afloat during the recession of 2020.
The bizarre events of 2020 didn’t happen in a vacuum. Our current situation results from decisions, actions, or lack thereof, over months and years before the recent economic downturn.
The housing market’s stability is another example of something in motion long before 2020 and COVID-19. It goes back to the last time the economy took a sudden nosedive.
For those not old enough to remember, the Great Recession of 2007-2010 was set in motion by the subprime mortgage crisis. As a result, banks became incredibly strict on who could and couldn’t get approved for a home loan. Those with a certain level of outstanding personal debt versus income found it much harder to get approval for a mortgage unless they already owned a home.
Coupled with diminished employment opportunities in the aftermath of the last recession, a whole class of Americans became practically ineligible for homeownership. Fast forward ten years later, and these same people were more likely to be laid off due to COVID-19.
In other words, the folks most negatively impacted financially by the pandemic are those who were unlikely to be in the market to buy a home anyway. Those whose jobs were able to be done at home are those more likely to be in a position to purchase real estate, whether it’s a home or an investment property.