What does history tell us about the impact of pandemics on the housing market?
Zillow Research took a deep dive into the economic effects of previous global pandemics to offer some perspective on what those effects might be for the current one.
Key findings of the report:
During the 1918 influenza and the 2003 SARS pandemics, economic activity fell sharply, but snapped back quickly once the pandemic was over.
The rapid fall and rebound associated with those pandemics differs from a standard recession in which economic activity falls for six to 18 months, and then recovers more slowly.
During the 2003 SARS pandemic, home prices in Hong Kong did not fall significantly, but transaction volume did.
Precisely forecasting the economic effects of COVID-19 is complicated by the uncertainty around the virus’ spread, the policies adopted to control it and how those two things might interact with pre-existing recession risks that existed at the start of the year.
Are people still buying homes?
People have all kinds of reasons for moving, and may not have a choice about the timing.
While many people might postpone buying right now, the New York Times reports that some buyers see opportunity in buying, given the low rates and relative lack of competition for what continues to be tight inventory in for-sale homes.
What happened to the housing market during previous recessions?
As federal and state officials scramble to limit the economic fallout from the coronavirus, economists are talking once again about the prospect of a recession.
In July, Zillow Research studied the link between recessions and home values.
“In the past 23 years, there have been two national recessions — the dot-com crash from March to November 2001 and the Great Recession from December 2007 to June 2009 — and several statewide or regional recessions. Home values broadly fell across the country during the Great Recession, but in most other cases annual home value growth remained positive.”
“Recessions do have an impact on the housing market, but the widespread collapse of home values during the Great Recession is an outlier.”