How This Is Different Than 2008
The Financial Crisis that began in 2008 decimated the housing market because mortgage loans were irresponsibly made to people who were unqualified to pay them back. As a result, loans were foreclosed on in record numbers, and by 2010 fully 52% of homes that were on the market were ‘distress sales’, either short sales or outright foreclosures. Sellers were competing against other sellers to unload properties, prices tumbled and the market fell apart.
By 2012, Denver and the foothills areas saw a huge swing from a buyers’ market to a sellers’ market as the city’s economy grew, housing found its footing and prices began to rise. This year promised to be heady as the sellers’ market continued, characterized by under-supply of available inventory in the face of oversized demand for homes by our growing population.
A month ago, our governor ordered Realtors, along with the rest of the state, to stay at home while we dealt with the COVID-19 pandemic. Meeting face-to-face, having open houses and showing homes were temporarily off the table as our healthcare system sorted out the next steps to take. The housing industry came to a near standstill for a couple of weeks, but showing homes has recently been approved by Gov. Polis, albeit with more requirements from sellers wanting to know how serious buyers are and insisting they sign COVID-19 disclosures, the days of looking at homes as an explorative outing are on hold.
For stats hounds who look for evidence in the supply vs. demand numbers, it is difficult to put a finger on a widening spread between available inventory and home sales at this point, partly because sales represent contracts that were written 30-60 days ago and partly because sellers are self-selecting to take their homes off the market temporarily (thereby bringing supply down in conjunction with any downturn in buyer activity).
As social distancing is further relaxed, however, virtually all analysts expect the demand for homes to return and the market to be robust. In fact, Denver’s and the foothills’ market will probably be noteworthy compared to other areas of the country due to historically low interest rates for borrowers and huge pent up demand from our growing population.
The takeaway? A decade ago, we experienced too many homes on the market. This year, we’re experiencing a Health Crisis in the midst of too few homes on the market to meet the needs of our expanding workforce. The differences between today and 2008 could not be more stark. This will not be a crash that takes years to work our way out of. Rather, it should improve quickly and vigorously once again as buyers are allowed to see and buy homes.