When COVID-19 cases exploded back in March 2020, society had to shut down, and the economy tumbled soon after. Many predicted a collapse of the real estate market, which had been booming for the past five years.
But while there was no doubt a brief freeze in buying and selling, the housing market’s overall state remains mostly intact. From luxury condos in Manhattan to ranch-style homes outside of Austin, residential real estate is still being bought and sold at a rapid rate. The same goes for commercial properties in most major cities.
The following breaks down why the real estate market has stayed strong during the recession of 2020:
Investors see an opportunity
The knee jerk reaction to the dip in the economy led to properties getting undervalued, at least that’s what many leading real estate investors are predicting. Whether it’s through real estate investment trusts or direct purchase of investment properties, investors seem confident these options will lead to significant returns in the near future. It’s a substantial factor in why the housing market hasn’t crashed in recent months.
We appreciate home more than ever
With so many of us spending so much extra time at home, we’ve come to realize how important work-life balance is for our health and wellbeing. We want a home we love, but the past few months have highlighted faults in many living situations. Perhaps it’s the absence of green space, or maybe it’s the desire for more room. Whatever the reason, people continue to want a change of scenery, especially if it’s the place where they’ll be spending most of their time.
This recession seems different
Most recessions are the result of weaknesses in the fundamentals of the economy. While economic inequality plays a major role in determining who’s been financially hit the hardest during 2020, it’s not the primary driver of the downturn itself. The current recession is due to the shutdowns and social distancing measures needed to slow the spread of COVID-19. It’s similar to the financial fallout seen after the 9/11 terrorist attacks, rather the Great Recession of 2007-2010; the system’s shock is a more sustainable outcome than the crumbling of the system itself.
Real estate is always in demand
The thing about real estate is that it’s needed for virtually everything else in the economy. Unlike cannabis, cryptocurrency, and other trendy investment options, it’s one of the oldest types of investments on earth. That makes it one of the safest. It’s no surprise, then, that real estate sales remain strong despite the ongoing recession. Whether it’s three months from now or not until the end of next year, life will eventually get back to normal. When it does, individuals and businesses will still need places to live and operate.
Those hardest hit were already unlikely to buy property
Many people were unable to buy homes before 2020. These same individuals were more likely than others to be laid off or have their work hours reduced due to the pandemic’s impact on businesses. Meanwhile, those more likely to buy property are those who held onto their jobs due to them being doable from home. In other words, the typical triggers of a housing market crash haven’t materialized.
There’s no downplaying the dangers of COVID-19 and its negative economic consequences. It’s a deadly disease and the world won’t return to normal until we get it under control. What’s more, the pandemic has exposed fault lines in society. With that said, it’s a situation we can overcome.