Housing Market Crash 2020 Will Be Worse Than In The Great Recession

The US economy has been contracting very fast as many businesses suspend their operations. The stock market is also very volatile because of the recent market crash and experts are warning that this crisis will spread even to the housing market. The question that most people are asking is whether this housing market crash will be similar to the crash we had in the 2008 financial crisis. The opinion of most economists is that there is a possibility that this housing market crash will be bigger than the 2008 crisis. Many indicators are pointing out that this housing market will collapse in the same extent like the stock market. Because of the current economic meltdown, the stock market has collapsed by about 30 percent and there are warning that the market will fall further. If this is the case, it means that the housing market will crash by approximately 30-40 percent. There is a very high possibility that this will happen because for years, the housing prices have been rising and this has created a big bubble that is about to burst before us.

It is very clear that the current collapse of the broader economy will affect the housing market in the near future. Regional brokers are on a pressure to offload some of the mortgage bonds because of the increase in margin calls as a result of this global economic shock. Flagstar Bancorp is one of the biggest lenders to the mortgage providers in the United States and on Friday they announced that they will stop funding new loans to purchase homes if the loans are not backed by the government. Other lenders have also been tightening their terms of financing to various mortgage providers by either refusing to support some types of loans or by raising the costs associated with financing. some of the mortgage funders like the Angel Oak Mortgage Solutions said that they are pausing any loan processing for the next two weeks.

Because of this economic fallout in the first quarter of 2020, the demand for homes is likely to hit a record low. Economists are already warning that the US economy is slowly plunging into a recession and if the current health situation is not addressed promptly, the current economic meltdown might end up being a depression. Actually economists from Goldman Sachs, Morgan Stanly and other investment firms are warning that this is just the beginning of economic fallout and the worst might happen in the next 1-2 months. If this happens, the US home market will be hit very hard because consumers will be spending their money to buy only essential during the crisis. Home buyers will buckle down and the demand for houses might decline by up to 50 percent. Everyone has already been affected by the economic meltdown and majority of the people will not commit themselves to take new mortgage loans because the future is very uncertain.

We can learnt many lessons from the 2008 housing market burst where the housing market declined by about 8.4 percent. Because of this, wealth worth nearly $2 trillion was lost as the housing market crashed. Reports show that 11.7 million homeowners in the United States were under the water and this meant that their homes were worth less than their mortgage balances. In contrast, by the end of 2019 more than 5.2 million homeowners were under the water and at the same time, millions of people were still buying more homes. This is the exact replica of the 2008 housing crisis and the only difference is that this time round it will be more sever because the economy is already at the blink of an economic collapse.

Because of the recent economic crisis, thousands of businesses are shutting down and as a result millions of Americans are expected to lose their jobs. Hotel and airlines have fully shut down their operations for a foreseeable future. Other businesses have already suspended their operations and as a result millions of people have lost their jobs. Among these people, many of them have mortgage loans and this means that they will not be able to pay their dues on time. A cascade of mortgage loans default is expected and this might be what will blow up the housing market. This housing crisis will be several times bigger than what we saw back in the 2008. The near future looks dark and this might be the only chance the government has to help the troubled housing market and the economy at large.