Coronavirus has impacted all financial markets, including the mortgage industry. However, some experts are seeing some positive trends in relation to the real estate market as we eventually look to come out of this major economic downturn. More specifically, they are looking at how home prices will react during this recession compared to previous ones.

Downside Stickiness

Mark Fleming is chief economist with First American Financial Corp. and he believes that home prices aren’t likely to plummet as a result of the COVID-19 economy. He refers to a trend known as “downside stickiness” in his company’s latest House Price Index report.

Downside stickiness is a trend that relates specifically to houses during a market slowdown. While many goods and services experience strong downward pressure during times like these, houses are often affected differently. Downside stickiness refers to how houses tend to retain value despite a poor economy. How home values are affected will largely depend on the causes of the recession.

“While every recession is different, we examined how the three most recent recessions impacted house prices for insight into how house prices may far in the current environment,” Fleming writes. “With the exception of the 2008-2009 recession, house prices have demonstrated their ‘downside stickiness’—zero or slow growth, but not much decline.”

2020 vs. 2008

It’s no secret 2008 recession was primarily caused by the subprime mortgage collapse, which had a direct tie to the housing market. Homes were overpriced and mortgages were too easy to get, which led to the bubble bursting violently. Sellers were desperate to sell and home prices were driven down dramatically. In most other recession environments, sellers will tend to simply pull their homes off the market rather than sell them at lower prices. This is exactly what we are seeing during the COVID-19 crisis.

Because our current recession has been caused by a viral pandemic, sellers have even more incentive to pull listings because it’s another way to slow the spread of coronavirus. They don’t want a bunch of strangers in their home right now. In many real estate markets, in-person home tours aren’t even an option while state and local shelter-in-place orders remain in effect. That’s certainly the case here in San Diego County.

What Home Pricing Trends Can We Expect?

That’s not to say that home prices won’t be affected at all by this. Many homeowners are struggling financially. They may be able to get forbearance to delay mortgage payments and they may be able to refinance at lower rates if they qualify, but we can expect to see the value of homes drop some—or at the very least, level out—before this is all said and done. It’s jut not likely to be anything quite like we saw in 2008 and 2009.

“As buyers and sellers pull back from the market and some sellers adjust their price expectations, it’s reasonable to expect a reduction in home sales and a moderation in price appreciations in this year’s spring home-buying season,” Fleming adds. “Yet, transactions will continue to occur. The housing market may be down, but it may be better positioned than many believe.”

Economic Factors

Heading into 2020, many factors contributed to rising housing prices. These include a record-low housing inventory, economic growth, low unemployment, low mortgage rates and tighter mortgage underwriting—different factors than what led to the housing boom that peaked in 2006. We saw the supply of homes for sale decline by 10.2% in March (compared with March 2019). This means sellers are content to wait out the storm instead of desperately selling, This is what downside stickiness is all about and why many experts like Fleming expect homes to generally retain value through this situation.

Whether you are buying a home now or thinking about it in the near future, it will be important to be ready. The market will move fast as restrictions are eventually lifted, though we can expect mortgage qualification standards to remain tougher for awhile. Do everything you can to be prepared, including getting pre-approved for a loan. If you are wanting to stay in your home and think you might qualify for a home refinance, that may be another option worth exploring.

For all of your mortgage needs during uncertain times like these, Transparent Mortgage is here to help. Call us today at (619) 701-3906 or email me directly at

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.