Coronavirus 'won't lead to another Great Recession for housing'
While the housing market will suffer from the COVID-19 crisis, it's stronger than it was in during its last crash in 2008, according to First American Financial.
"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," Mark Fleming, chief economist at First American, said in a press release. "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."
January's home purchasing power — the amount a consumer can buy based on fluctuations in income, mortgage rates and home prices — jumped 13.2% annually while increasing 1.4% from December.
The Real House Price Index, which measures changes in home values based changes in home purchasing power, decreased 3.8% year-over-year and edged up 0.1% month-over-month. Median household income rose 2.3% from January 2019.
Though these figures don't yet take into account the economic effects of COVID-19, they illustrate the housing market's power before the pandemic began.
"As we are all too aware, the coronavirus outbreak has taken hold of the domestic and global economy. The housing market is not immune to its impact but may be in a better position than many believe," said Fleming. "Recent data shows that weekly unemployment claims soared to a record, which will, in turn, work to depress household incomes and consumer confidence. While mortgage rates have fallen due to the economic uncertainty, potential home buyers that are confined to their homes cannot necessarily take advantage of the affordability boost."
At the state level, New Jersey and Ohio had the only annual increases in RHPI at 2.7% and 0.2%, respectively. Utah had the largest decline, falling 7.5%. New Mexico and Colorado followed, each with decreases of 7.2%.
By metro area, Cleveland home prices grew the most at 3.5%, trailed by 1.4% in Milwaukee and 0.8% in Cincinnati. The greatest decreases came with San Francisco's 8.4%, Boston's 8.2% and Denver's 8.1%.