With thriving housing market, experts talk economic future
The housing market is on fire, seeing a record jump in sales this summer. In July, 5.86 million existing homes sold, a nearly 25 percent increase. The trend is expected to show it continued into August.
The Federal Reserve also announced interest rates will stay a record low near or at zero for the next few years. Those factors are driving up the value of homes.
Zillow says Florida homes are up 3.6%.
“When rates are down that low, I mean, the money is almost free,” said Tom Smythe, a finance professor at FGCU.
Smythe said there could be a downside.
“We’ve seen before sometimes the market gets a little bit ahead of itself.”
That’s what happened in 2008 when the housing market collapsed and the Great Recession took hold of the economy.
“I think we’d have to see say six months from now if the housing market is still on sort of a steady sharp incline relative to what it is today,” Smythe said.
For John Silvia, Wells Fargo’s former chief financial officer, he doesn’t see that happening here in Florida.
“We have such a variety of properties and locations, plus, no matter how you say it, it’s a Sunshine State and has no income tax,” Silvia said. “That may seem incredibly simple, but for a lot of people, apartments and townhomes in the city, they can’t do that.”
Both economists said what will put the country back on solid economic ground is a COVID-19 vaccine people can trust and that’s effective as a treatment for the coronavirus.
A difference between the recession in 2008 and in 2020 is that household income is relatively stable because of the stimulus and unemployment checks Americans received from the government.
Silvia also said a consequence of the current economic downturn is the fact that people have lost jobs that will never come back.
“I think for 80 to 90 percent of America, we’re recovering quite nicely,” Silvia said. “But the problem you run into is every recession means there are some people who are displaced.”