The Unassuming Economist

From Econofact:

“The Issue:

The price of housing has a special importance because housing is both a basic necessity and a key component of wealth. Around the start of the pandemic, some experts predicted a protracted collapse in housing prices and the housing market. For example, in April 2020 the staff at Freddie Mac projected home prices would fall by 0.5 percent over the next year. In fact, the opposite happened: The Case Shiller National Home Price Index rose by 15 percent between April 2020 and April 2021 while home sales hit a 15 year high in the calendar year 2021. This stands in stark contrast to the Great Recession when the price index fell 44 percent between May 2007 and May 2009. But one similarity across the Great Recession and the COVID downturn is the wide differences in housing price changes across different parts of the United States. What has happened to housing prices during the COVID pandemic and why?  And what are the broader economic implications of this?

The Facts:

House sales and housing construction fell at the outset of the pandemic in March 2020. The total housing inventory on the market, including newly constructed houses and those being resold, was down 10.2 percent between March 2019 and March 2020. Between February 2020 and March 2020 housing starts declined by 22.3 percent, perhaps reflecting builders’ bleak expectations for future demand. Total existing-home sales fell 8.5 percent in March 2020 compared with the prior month and tumbled a further 17.8 percent in April.”

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