For many of us, 2020 has been one of the most tumultuous years we have ever faced. Challenges such as a global pandemic, coupled with an economic recession, have caused heartache for many and we can all agree it has tested our innate abilities to adapt and remain hopeful. Despite all the trials and tribulations, it’s important to consider the lessons we have learned.
The 2020 housing market has been one of the bright spots throughout the year and much of this success is a result of what we learned 12 years ago during the Great Recession. There has been a lot of misguided information comparing the housing crash of 2008 to this year’s current disruption and these claims are simply inaccurate and misleading. In 2008, depreciating home values, declining sales and home equity, paired with major economic decline resulted in massive job losses and found many homeowners unable to make their payments. This resulted in an oversupply of inventory as they rushed to sell off homes or headed towards foreclosure. Not only was the economic downturn a factor, but also the questionable lending practices which led to a financial burden for many overextended families.
In comparison to today’s market, homeowner equity is at an all time high as values continue to appreciate. Stricter lending requirements are now in place and today’s homeowners are taking the time to understand mortgage terms. Therefore, they are making educated and informed decisions leading to financial stability. Uncle Sam and the U.S. government also deserve some credit. As Covid-19 began to spread with quarantines and stay-at-home orders in place, it became evident that action was needed. The mortgage relief plan and economic stimulus packages were able to protect against foreclosure and offered relief to struggling homeowners through a forbearance program. These actions are all a result of lessons learned and have shielded us from repeating our history while providing an opportunity for us to continue moving our thriving real estate market ahead.
Inventory has been a continuous challenge as supply has remained at historic lows, but sales have not been slowed. The level of buyer traffic has rapidly increased, in large part, due to a new era of homebuyers. The millennials have arrived in full pursuit of homeownership which has resulted in a much higher demand for residential property. This increase, paired with the baby boomers’ desire to downsize, has created quite the challenge for buyers navigating the market. We have also experienced historically low interest rates which have offset higher than normal appreciation rates allowing home affordability to remain at levels suitable for buyers. While many believe we are in a seller’s market (which we are) home affordability indices suggest it is still a great time to purchase real estate.
In a year where turbulence has forced us to adapt, we have had to make transitions, especially when it comes to our needs and desires. As a result of a global pandemic, buyer desires have evolved and so has the meaning of home. Homeowners are now seeking opportunities in areas with less density, while looking for larger, multifunctional spaces that allow them flexibility. A shift in the meaning of home has occurred and this is a particularly important lesson we have taken from 2020.
I believe that we can all agree, 2020 has been a challenge and that we are all hopeful for a sense of normalcy heading into the new year. It is, however, important that we look back on the year with a glass half full mentality and learn from the lessons it has provided. The housing market is continuing to drive the economic recovery and homeownership is a pillar for financial stability. As we move into the new year, I am mindful of the continued challenges we face yet hopeful in the resiliency of humanity and the direction of the real estate market.