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The 2008 recession yielded housing bargains in subsequent years, but that probably won?t be the case for the next one The 2008 financial crisis brought the global economy to its knees and sent American home prices into freefall. For anyone who managed to hang on to their job, savings, and credit score, the aftermath of the crisis was a prime opportunity to buy a house at a bargain price.
The Great Recession is the only economic downturn millennials have lived through as adults, so, naturally, they might think that the next recession?which appears to be on the horizon because of the spread of COVID-19?will present a chance for many millennials to finally join the ranks of homeownership.
This is unlikely to be the case. The last recession was an anomaly in more ways than one, and its effect on the housing market is the biggest outlier relative to other recessions. The 2008 recession didn?t cause the housing market to go into freefall. The housing market going into freefall caused the recession.
In the years leading up to that collapse, mortgage lenders were issuing mortgages that were destined to fail. Those mortgages were bundled into bonds and distributed across the global financial system. When people started defaulting on those mortgages, the financial system collapsed, and millions of homes went into foreclosure. Prices dropped.
In contrast, the next recession?should it hit?will be induced by cities going into lockdown in hopes of preventing the furth...