Let’s start off with the bad news first. On Monday, the National Bureau of Economic Research (NBER) announced that the U.S. economy is officially in a recession. This did not come as a surprise to many, as the Bureau defines a recession this way:
“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”
Everyone realizes that the pandemic shut down the country earlier this year, causing a “significant decline in economic activity.”
Though not surprising, headlines announcing the country is in a recession will cause consumers to remember the devastating impact the last recession had on the housing market just over a decade ago.
The Boston real estate market, however, is in a totally different position than it was then. As Mark Fleming, Chief Economist at First American explained:
“Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”
Now for the good news, There are four major differences in today’s Boston real estate market which are:
- Families have large sums of equity in their homes
- We have a shortage of housing inventory, not an overabundance
- Irresponsible lending no longer exists
- Home price appreciation is not out of control
We must also realize that a recession does not mean a Boston condo crash will follow. In three of the four previous recessions prior to 2008, Beacon Hill condo values increased. In the other one, home prices depreciated by only 1.9%.
Boston condos and the Bottom Line
Yes, we are now officially in a recession according to some experts. However, unlike 2008, this time the housing industry is in much better shape to weather the storm.
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