A Look at the Economy of COVID-19 vs. The Great Recession

Posted by Hannah Lapin on Apr 14, 2020 7:00:00 AM

Great recession vs. now

In a recent webinar, “The Effects of Covid-19 on the Single-Family Rental Industry,” Roofstock Chief Development Officer Rich Ford compared the state of the economy during COVID-19 to the Great Recession of 2008. Here are some of Ford’s key findings on the similarities and differences between the two:

Similarities Between COVID-19 and the Great Recession

Currently as well as in 2008, we’ve seen significant dislocation in the stock market, banking sectors, and the Real Estate Investment Trusts (REITs). Additionally, in both instances, oil prices plunged, and home-builder stocks fell. On a positive note, during the Great Recession and now, so far, multi-family properties remain strong with high occupancy.

Differences Between COVID-19 and the Great Recession

First and foremost, the causes of the recessions differ substantially. The impending recession is driven by a dramatic economic contraction caused by a pandemic, and the impact on real estate is one of the consequences of this pandemic. Contrarily, the real estate market crash was the cause of the downturn of the Great Recession.

Another key difference is the state of the single-family rental market then and now. Leading into the Great Recession, home ownership was at its peak, and there was a heavy inventory of homes on bank balance sheets.  As a result of the Great Recession, new renters came on the market after foreclosure, and purchasing homes from courthouses became prevalent. Now, we have institutional investors ready on the sidelines and institutional property management platforms, neither of which were prevalent in 2008.

Ford is confident that the single-family rental market is here to stay, and institutional and out-of-state capital is likely to continue to expand in the SFR sector. For more webinars and insight from Ford, we recommend visiting Roofstock.

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Related: Possible Expansion of Fed Lending Program Could Help Non-QM Lenders, Why Might Mortgage Rates Go Up When Interest Rates Go Down?

Topics: Coronavirus