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Housing is essential, even in a downturn
There’s a lot of anxiety about housing and the economy, and for good reasons. However, we shouldn’t let our fear of the unknown inadvertently cause more problems. This is the time to focus on what we know and be careful not to overreact to what we don’t know.
Let’s start with what we know
WHAT WE KNOW #1 Before the Coronavirus, unemployment was at record lows, the stock market at record highs, mortgage interest rates around a healthy low of 4%, and housing at a higher demand than available inventory. Growth in almost every sector was up.
A market correction was likely coming but our economy still has fundamental strengths.
WHAT WE KNOW #2 Aside from the Great Recession of 2008 when housing and lending were the cause of the downturn, housing gains during most recessions remained positive. That’s because housing is essential, even in a recession. Buying and exchanging property during a recession is one of the more stable investments.
Even during the Great Recession, housing not only recovered, it thrived.
WHAT WE KNOW #3 Today’s homeowners have more equity and savings than they did during the Great Recession, giving them a financial cushion they didn’t have in 2008. Borrowers are not over leveraged with sub-prime mortgages. Refinances and HELOC’s recently soared to record numbers as owners took advantage of 3 and sub-3% interests rates. This added savings and/or liquidity of their equity creates a more stable housing market.
If you are waiting for a dramatic decrease in housing prices, you may be waiting in vain.
WHAT WE KNOW #4 The government does its best to step in to minimize the extent of a recession, but its efforts can’t possibly eliminate losses. We have to be prudent as we deal with the current reality and plan for the next best move. For example, the forbearance legislation that allows renters and borrowers to miss up to three payments does not mean someone else (i.e. the government, landlord or lender) is going to pay these for you. If you can, pay your rent or mortgage. If you can’t, you will not be penalized for the late payment (e.g. lower credit score, eviction, or default) but you are still responsible for these payments and any interest, likely in the fourth month.
If you don’t pay or have a plan for repayment, you will be in the same predicament without this forbearance allowance.
WHAT WE KNOW #5 Top investors like Warren Buffett say the best time to invest is when everyone else is panicking. We have no way of knowing the full extent of the Coronavirus to the economy, but we know from experience that the only way from a downturn is up.
“Invest in the long term, and be greedy when others are fearful.” – Warren Buffett
WHAT WE KNOW #6 Many people have lost their jobs and are uncertain of their current financial situation. Worse, people are sick and many are dying. This is scary and not to be trivialized. We are all hoping for a quick remedy to this infection. We also hope for a fast recovery to those unemployed and industries most impacted by this pandemic.
We value hope and a helping hand in a time of uncertainty
Here are 5 positive ways to take the next best step forward, together
1. Do what you can to keep this virus from spreading
We have all heard what we can do to help stop the spread, so let us each do our part. Be grateful for those who are on the front lines combatting this pandemic and keeping what areas of the economy we can open. Please be cautious, courteous, and selfless.
2. Be constructive and supportive of those trying to help
Governments, organizations, and people are not perfect. We are all in this together and we want the best outcome. Find ways to be helpful and supportive of those trying to make a difference. This is not the time to be a sideline quarterback, finger pointer or conspiracy theorist.
3. Don’t make rash decisions based on fear, anger, or anxiety
Look at your current situation for what it is. If your financial situation is secure and you were planning to buy or sell, your actions help the economy move forward and, as history has shown, strengthen your position over time. You may even want to take advantage of the great offers on a future flight or vacation package with money-back guarantees.
4. Find ways to help those who are struggling
Be a helper whenever possible. As Fred Rogers put it, “When I was a boy and I would see scary things in the news, my mother would say to me, ‘Look for the helpers. You will always find people who are helping.'”
5. If you have extra time on your hands, find ways to connect with family (and yourself)
If you are working from home, work hard, be productive, and follow a schedule. Otherwise, spend time with your family or roommates creating memories. Read or write a book. Paint or draw. Exercise. Meditate. Fix something. Finish a project. Teach your children how to…