Monday April 27, 2020
In economics there is a term known as a black swan event. These events are rare and seemingly spontaneous occurrences that have potentially severe consequences, often causing catastrophic damage to an economy.
If we look back through history we can recognize several black swan events that threw the United States economy into a tailspin:
- Arab-Israeli war
- Oil embargo
- Iranian hostage crisis
- Black Monday
- First Gulf War
- 9/11 attacks
- SARS pandemic
- Global financial crisis of 2008
- Intervention in Libya
- Brexit vote
- and now, COVID-19.
All of these events were shocking and terrifying for many people and came with short-term, negative consequences for the stock market. Some of them also pushed us into a severe economic recession that resulted in a slowdown of the housing market.
Black Swan Events and the Housing Market
When a black swan event happens and the economy starts to contract (otherwise known as a recession), the Federal Reserve usually intervenes and lowers interest rates. Doing this makes housing more affordable, and people who have been renting their homes are brought off the sidelines and into the housing market because buying a home has become just as affordable, if not more affordable, than renting one.
This is exactly what we’re seeing today. As millennials enter into a stage of life where they want to have families, home-ownership rates start to increase.
If we take another look back at history, this time analyzing real estate appreciation rates, we see that have values have weathered most recessions remarkably well and continued to appreciate through economic turmoil at an average rate of 5%.
The short-term crisis that is COVID-19 is undoubtedly scary, but there is opportunity for long-term financial gain through real estate investment. If you have a stable job and are currently renting your home, now is an excellent time to take the step into home ownership and secure a stable financial future for you and your family.
Finding a home and getting a mortgage should be simple, low-stress, and fun. If you have any questions or would like to start the process, fill out the form below to request a consultation with one of our mortgage professionals.