Economies move based on predictable patterns of behavior — habits of buying and selling. Because it takes an enormous effort to break habits — even economic ones — when things are headed in one direction, they’re most likely to continue along that path. So as an investor, when you see a trend, it’s your friend.
What is the trend saying right now about the 2021 real estate picture? Despite COVID-19 and the uncertainty that comes along with the pandemic, things are looking up. In addition, an analysis of consumer search data as it correlates to the real estate market confirms: The picture isn’t as bleak as some have been expecting.
On the graph, you will notice a line of support. Over the last 50 years, regardless of the severity of an economic downturn, existing home sales have not dropped below the levels predicted by this line. The strength of this “floor” on which the housing market stands is largely driven by the increasing need for housing for an ever-growing population and a historically strong economy. Here are some of the traumatic events the housing market has bounced back from, in perfect sync with the line of support:
Vietnam War and early 1970s inflation: The economic troubles of the early 1970s caused a minor drop in home sales, but the economy soon rebounded and sales increased.
Late 1970s, early 1980s inflation: Even though inflation nearly floored the economy, existing home sales still bounced off the support line.
The Great Recession of 2008: As the economy folded, so did existing home sales, but when they hit the line of support, they rebounded right back.
What Current Data Tells Us
As COVID struck the economy, home sales plummeted right down to the line of support — but only for a short while. Over the last couple of months, we’ve already seen existing home sales bounce up off the line of support. Even if, like in the early '80s, the numbers test the line again for several months, the data still indicates we’re in for a healthy bounce in 2021.
Google Search Analysis Confirms What the Data Is Telling Us
As of the beginning of August, Google searches for “process of buying a house” rose 950%, and the query “minimum credit score to buy a house” also saw a significant rise in popularity. In addition, questions about how to use your 401(k) to buy a house jumped 2,800% over the last three months.
According to the data, people are gearing up to jump back in the market. The rock-solid line of support that has been the foundation of the housing market for the past 50 years looks like it’s holding the market up one more time. An analysis of search trends confirms the upward move. If there are two things stronger than COVID, they are the American dream of homeownership, and cold, hard data.