When Is the Economy Going to Recover?

If you are like most of the home buyers I advise, the following questions are likely rolling around in your head:

“Is this a golden opportunity to capture a near record-low fixed mortgage rate?”

“Is this the time to find a seller who is fearful and motivated to sell quickly?”

“Is this what Warren Buffet is talking about when he says, ‘Be fearful when others are greedy, and greedy when others are fearful?'”

And most of all… “When is the economy going to recover?”

We are hearing a version of each of these questions from nearly every client we consult with. The reality and truth is nobody knows EXACTLY when this will end, but we do know it will end EVENTUALLY.

What you should be asking yourself is whether or not your job is reasonably secure and if you can afford a home today. If so, this is likely a great opportunity for you; and if you plan to be in that home for at least a few years, you will likely be able to ride out any further downswing.   

Although nobody knows for sure how quickly the economy will recover from the COVID-19 pandemic, we can look to see how quickly past pandemics cleared out and study what the experts who are putting money back into the markets are forecasting.

A Quick Recovery

Most of the experts we follow are suggesting a V-shaped recovery, which would mean the economy is ready to roll. As soon as the lockdown measures start to ease, it’s likely the economy will roar back quickly.

According to Goldman Sachs, JP Morgan, and Morgan Stanley, the economic storm will pass by the end of 2020 and the worst of it will be over by this summer.

If they are correct, that gives you (the prospective bargain shopper or home buyer) about two months to take advantage of the current situation.

Why Now is the Time to Take Action

Frank Nothaft noted that, coming into the COVID-19 pandemic, loan delinquency rates were the lowest they had been in a generation. As those impacted the crisis go back to work, we believe it’s likely the real estate market will surge as the demand for housing continues to exceed the supply of homes being built and that are currently for sale.

“Home loan delinquency and foreclosure rates were the lowest in a generation before the COVID-19 pandemic hit. Recession-induced job losses will fuel delinquencies. However, wide-spread foreclosures across America will likely be averted because of the home equity buffer that homeowners have and the available forbearance programs.

We expect delinquency rates to jump significantly throughout the year as the economic toll from COVID-19 becomes more evident….The ultimate extent of the higher delinquencies will depend on how quickly the broader economy opens up again and unemployment levels rebound – both of these factors are uncertain at this time.”

Frank Nothaft. Executive, Chief Economist with CoreLogic.

Conclusion

It’s always difficult to time the market, but we believe now is the time to be bold and take action when others are fearful. What I know now, having been in the mortgage and real estate business for over twenty years, is that the home buyers who overcame their fears and bought primary-residence homes and investment properties during the great recession were handsomely rewarded with many years of appreciation.

Many of my clients who bought during the Great Recession not only got a great deal on their home but also became WEALTHY. They did this simply by making the decision to invest in real estate when most were headed for the exit doors.

Could this be a similar once-in-a-decade opportunity? Certainly not for everyone. However, if your employment and income are relatively stable and secure, we see more opportunity than risk from here on out.

If you are considering buying a home or getting pre-approved so that you can move quickly if the right opportunity presents itself, I’d love to hear from you.