Financial analysts look at world economies in the wake of COVID-19 and anticipate a housing collapse to come.
Some 2020 investors see the housing market as capable of striking global economies harder than COVID-19 did. The key ingredient that economists consider as they evaluate the housing market is cashflow. As of July of 2020, a lack of global cashflow disrupted the ability for people to pay their mortgages.
What We had Already Perceived as a Coming Recession
Many economists say that COVID-19 had only sped up what was inevitable in homeownership. Though financiers agree that the coronavirus has caused a recession, the housing collapse likely to follow was already brewing within the financial markets. Below are some reasons why many see the housing collapse to come as unavoidable:
Prices Rising Faster than Inflation
Demand is a driving factor behind the price rises of any financial market.
Rising prices, as they relate to homes, is the result of more buyers than there are sellers. However, prices that rise faster than inflation reveal underlining flaws within home valuations. Yesterday, there existed roughly as many homes as there are today, so “suddenly high prices” express a superficial influx of buyers. Housing markets that correct themselves from inflated prices do so via market crashes. Here’s another factor that can cause a housing collapse:
*Job Losses—Businesses contribute to the influx of unpaid mortgages by furloughing the paid employees they’ve hired. Some homeowners have bought new houses but have been laid off from work and now can’t pay their mortgages. Unemployment is another indicator, though similar to the rate of job loss, that can reveal an economy’s inability to pay its mortgages.
Avoiding a Housing Bubble Entirely
We can avoid a sudden housing collapse by realizing how technology is also influencing prices. Digital technologies not only make homes easier to buy, but business owners have also been buying properties in order to operate Airbnb rentals. We can avoid a housing crash by taking the greed induced by technology out of the market. The challenge that Airbnb merchants have, for example, is a lack of travelers to help them pay the mortgages they’ve acquired.