With the housing crash of 2006-2008 in everyone’s thoughts and concerns, many Arizona homeowners are thinking the current correction in the stock market is a sign that home values are also about to tumble. What’s taking place in 2020, So far, is nothing like what happened the last time in Arizona. The S&P 500 did fall by over fifty percent from October 2007 to March 2009, and home values did depreciate in 2007, 2008, and 2009 – but that was because that economic slowdown was mainly caused by a collapsing real estate market and a meltdown in the mortgage industry.
Now in 2020, the stock market correction is being caused by an outside event (the coronavirus) with no connection to the current 2020 Phoenix housing industry. Many experts are saying the current situation is much more reminiscent of the challenges we had when the dot.com crash was immediately followed by 9/11. As an example, David Rosenberg, Chief Economist with Gluskin Sheff + Associates Inc., recently explained:
“What 9/11 has in common with what is happening today is that this shock has also generated fear, angst and anxiety among the general public. People avoided crowds then as they believed another terrorist attack was coming and are acting the same today to avoid getting sick. The same parts of the economy are under pressure ─ airlines, leisure, hospitality, restaurants, entertainment ─ consumer discretionary services in general.”
Looking at the current 2020 situation resembles the stock market correction in the early 2000s. Let’s review what happened to home values during that time. The S&P 500 index dropped 45% between September 2000 and October 2002. Home prices, on the other hand, appreciated nicely at the same time. During that time the stock market correction proved not to have any negative impact on home values.
If the current situation is more like the markets in the early 2000s versus the markets during the Great Recession, home values should be minimally affected, if at all. This is a different situation so be conservative with your decisions, talk to professionals.