It’s mostly a given the economy will take a sizable hit in Q2. For the slump to be classified as a recession, we’ll need two consecutive quarters of negative GDP growth. With sensible policy I am not sure the economy will be that bad in Q3. Anyway, I think it’s instructive to look back at how the Bay Area housing market did during the dot-com bust. I found this old Zillow article:
Between May 2001 and January 2002 – the dot-com bust – the median home value nationwide increased by 3.3 percent.
Over the same period, home values fell by 7.5 percent in San Jose and 0.7 percent in San Francisco, two tech hot spots.
In the Bay Area, lower-valued homes experienced a less-severe drop in value and a faster recovery during the dot-com bust and recovery than mid-level and top-tier homes.
For what is worth I don’t think the corona virus is nearly as bad as the dot-com bust. Dot-com was like a nuclear bomb targeted at tech. Many tech companies went belly up. But who knows? On the other hand interests rate literally has never been lower…
After some more thoughts I have turned more pessimistic on the US economy. I forgot we don’t have a normal executive branch at this critical moment and policy response may be rather lacking. Hope I am wrong.
House price took 2 years to get back to pre dot bomb level. Unless a seller doesn’t need to sell for the next 2 years, it seems the logical move is to sell ASAP?
So it had nothing to do with financial institutions throwing money left right and center to unqualified borrowers then rapidly repackaging it into MBS with scarce oversight from moody’s?
That was the immediate cause but it didn’t need to drag on for years.
And it never would have happened in the first place if the Fed hadn’t kept interest rates far too low for far too long and if quasi-government agencies Fannie Mae and Freddie Mac hadn’t been turned into market makers for subprime loans (thank senators Dodd and Frank for that).
Come to Austin suburbs (don’t get too near to downtown or the domain), plenty of big houses with 4+ bedrooms with attached bathroom, easy to self-quarantine. Houses are also on large lot and far apart - very good social distancing.
Sellers need to hurry up and sell ASAP. Looks like we are heading into the deep end… I may need to push out my buying plan to see if there are any bargains end of the year.
How long this kind of panic could possibly last?
You think the real estate market dip and rebound will lag stock market dip and rebound? Or you think stock market will not rebound before the end of the year?
I have no idea how long it will last. But if you have a house to sell this year, waiting seems to have more downside than upside. Buyers can afford to wait and see. Sellers have more lead time and need to commit sooner.
The communists want to lie but again there’s a limit to how much they can get away with. I think it’s more likely they will take up lots of debt to push some economically iffy projects like yet another high speed rail line to the middle of nowhere.
US economy leans more towards services like retail and restaurants. We could be in even a bigger slump than China. That’s the most scary part. Looks like my earlier hope of smarter policy like that of South Korea is misplaced. We are going towards the Chinese lockdown and shutdown model. Extremely costly!
