For the last few weeks, we have been saying that the market appears to be picking up in affluent areas like Studio City, Sherman Oaks, Encino, and Tarzana. It appears Forbes believes the entire housing market will see a boom once the brunt of COVID-19 passes. The Forbes article premises this prediction on historical data, which shows that housing prices drastically increase on the heels of a financial crisis.
The predictions are not all good news, suggesting that the rise in property value will not occur in 2020 (places like the Philippines will see a 15-20% decrease in property value by the end of 2020). The main takeaway is that the market boom will begin the next time the housing market corrects itself.
During the financial crisis following the dot-com bubble bursting and the housing bubble bursting, housing prices almost invariably spiked when the economy was primed to recover. The reason the housing market seems to be the first to benefit from a reinvigorated economy is two-fold: (1) mortgage rates are invariably low, as the decreasing interest rates is a good way to stimulate the economy; and (2) the government typically rolls out some type of stimulus package, which is designed to stimulate the economy.
Mortgage rates are already at historic lows, and we know that the Fed’s plan is to stimulate the economy over the next 6 months. We know this because unemployment is predicted to reach 25% (Great Depression numbers), and the Government has already provided one round of stimulus via direct payment. With the economy spiraling, the Government will invariably alter policies to encourage Americans to spend, and the housing market will be the victor. 2021 is going to be a great year for the housing market, but we shouldn’t forget the cost this boom came at.
At the Chernov Team we understand that knowledge is power, and knowledge of how the market will behave is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.
