Yes, Coronavirus Will Cause a Recession in the U.S. During 2020

Key highlights from this report:

  • Many economists now believe that a global recession is taking place.
  • The meltdown was caused by the new coronavirus and its ongoing effects.
  • A growing number of voices are saying the U.S. is in a recession, as well.
  • An economic slowdown will also chill the nation’s housing markets.

Will the Coronavirus Cause a Recession in the U.S.?

Will the U.S. enter an economic recession in 2020? And if so, how might that affect the real estate market in this country? How long might it “drag on”?

Many economists in the U.S. are suggesting we could enter a recession in the near future, due to the economic effects brought on by the coronavirus. Others are saying we are already there.

Andrew Levin, an economics professor at Dartmouth College, recently told CNBC he feels a recession is likely. According to Levin:

“The problem for the U.S. economy is a lot of cities are shutting down, and people staying home, not going out to restaurants, not going out shopping, not buying cars … I don’t see how we’re going to avoid having a recession.”

He went on to say that the best-case scenario at this point is one where people could go back to work and go out and spend money by the summer. In that scenario, according to Levin, the economy could see a “fairly quick” recovery from its current turbulence.

Another, less ideal scenario is one in which the public health emergency drags on for longer, prompting a longer economic downturn.

A Growing Chorus of Voices

There now appears to be a growing chorus of voices who agree that the U.S. and broader global economy have both entered a recession.

Deutsche Bank, the global investment bank headquartered in Germany, recently said they expect to see a recession during the first half of 2020. In a March 18 statement, the group wrote:

“We now expect the global economy will incur a severe but still relatively brief recession during the first half of 2020. All major regions of the globe could very well experience the sharpest quarterly declines in activity that have been recorded during the post-World War II era.”

S&P Global said they believe the United States is about to enter a recession (or might have already). In a report published on March 17, the financial analytics company wrote:

“While economic data for March is just starting to be released, the severity of the blow from the coronavirus leads us to believe that the U.S. is entering recession — if not already in one.”

On March 19, Reuters reported the results of a poll it sent out to 41 economists in Europe and the Americas. Thirty-one of them agreed that the global economy’s expansion period has ended, and a period of contraction (or shrinkage) has begun.

To quote that report: “The key outlook issue now is gauging the depth and the duration of the 2020 recession.”

Top economists from Bank of America also recently stated that the U.S. is entering an economic recession, adding that jobs will be lost and wealth destroyed.

Alas, it seems to be official at this point. According to a growing number of experts, the novel coronavirus has indeed caused a recession within the United States and abroad.

The question is, where do we go from here?

Shorter and Shallower Than the Last Recession?

There’s no shortage of doom and gloom in the news today. Let’s be honest, these are gloomy times. But that’s not a permanent condition.

It’s important for people to realize that an economic recession is a temporary condition. It occurs when there is a significant decline in overall economic activity and gross domestic product (GDP).

But it’s not the end of the world. The United States has been through more than 40 recessions in its history. This too shall pass.

China is ahead of the U.S., in terms of curtailing the virus’s spread. They had a massive outbreak, and then they got it under control. But we haven’t reached that point here in the United States. Not yet. In the U.S., the coronavirus outbreak will get worse before it gets better. That’s based on forecasts from a number of health officials.

But it will get better. The race for treatment and vaccination drugs is well under way. Containment and “lockdown” orders are being issued nationwide to halt the spread. We will get through this. There’s no question about that.

The real question is: How long will it take, and how much economic damage will occur before it’s all over? Those are hard questions to answer at present.

If I were pressed to make a forecast on all of this, I’d say the 2020 U.S. recession will be shorter and shallower than the Great Recession of the past decade. Once people can “get out” again — once they can return to work, go back to school, and resume shopping — the U.S. economy will likely bounce back quickly.

Outlook for the U.S. Housing Market

How will an economic recession affect the U.S. real estate market? Will we see a housing crash in 2020, during which home prices fall and sales activity grinds to a halt?

It’s hard to predict at this point, because the situation is fluid and ever-changing. But we will certainly see some kind of disruption in real estate market activity nationwide, especially in those areas where the coronavirus has a stronger foothold (like New York City and Seattle).

Depending on the length of this pandemic, and the efforts needed to contain it, some cities across the U.S. could experience a sharp decline in home prices. That scenario is most likely in the more expensive real estate markets, where a smaller percentage of residents can afford to buy a home.

In other local markets — those with fewer coronavirus cases and/or more affordable housing — home price appreciation might just slow down or flatten over the coming months.

In other words: The housing-related effects of the new coronavirus will vary from one local real estate market to the next, based on a number of factors. Some cities will take a bigger “hit” than others. Some might not see much of a hit at all.