{"id":124801,"date":"2020-05-23T15:00:33","date_gmt":"2020-05-23T21:00:33","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=124801"},"modified":"2024-01-05T17:10:34","modified_gmt":"2024-01-06T00:10:34","slug":"us-states-best-worst-2008-vs-2020","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/us-states-best-worst-2008-vs-2020","title":{"rendered":"These States Will Be Hit Hardest by COVID-19 Recession"},"content":{"rendered":"

The real estate market is, like the rest of the economy, in turmoil due to the coronavirus<\/a> and subsequent lockdowns. Some, such as Bryce Robertson<\/a> here at BiggerPockets,<\/em> believe the coming crash will be worse than the 2008 Great Recession<\/a>. Others’ outlook is not so bleak (including myself), but virtually no one is predicting the “V-shaped recovery<\/a>” many hoped for at the outset of the crisis.<\/p>\n

So how will real estate be affected?<\/p>\n

Well, the question of how<\/em> may not be easy to answer, other than a vague notion that it won\u2019t be good. But the question of where<\/em> it will be affected the most might be elucidated by looking at what happened during the real estate crash of 2008<\/a>. While it is universally agreed that housing was what caused that crash, the housing market did not collapse evenly.<\/p>\n

In certain areas, it was hurt. And in other areas, it was outright devastated.<\/p>\n

Where the 2008 Housing Crisis Hit Hardest<\/h2>\n

During the Great Recession, the number of foreclosure filings nationwide skyrocketed<\/a> from 532,833 in 2005 to 2,871,891 in 2010! It was truly a catastrophic housing collapse.<\/p>\n

As the following chart from Wikipedia<\/a> shows, the housing crisis in 2007-2008 was extremely deep, with prices falling almost 34 percent from peak to trough:<\/p>\n

\"\"
Juan Toledo – Standard and Poors [1] Original jpeg graph from paper-money.blogspot.com<\/a> released under Creative Commons Attribution 2.5 License<\/a>.<\/em><\/figcaption><\/figure>As noted above, however, this fall was not evenly distributed. As just a cursory look at the appreciation rates that preceded the crisis (1998-2006) shows, the Northeast, Southwest, and Florida saw, by far, the most appreciation<\/a> before the collapse:<\/p>\n
\"Map
AltiusBimm<\/a> at en.wikipedia<\/a> – Based on Image:Map of USA with state names.svg<\/a><\/em><\/figcaption><\/figure>\n

The counties that had massive amounts of appreciation also tended to be the ones hit hardest during the 2008 recession, as can be seen by this map<\/a> from RealtyTrac for the foreclosure rate by county in 2008. You will immediately notice that the hot spots are remarkably similar<\/a> (although the Northeast was hit substantially less hard than the Southwest and Florida).<\/p>\n

\u2018The Foreclosure Five\u2019<\/h3>\n

In 2009, the economist Alan Reynolds pointed out that \u201cThe Foreclosure Five\u201d\u2014California, Nevada, Arizona, Florida, and Michigan\u2014had by far the most foreclosures. As he noted<\/a>:<\/p>\n

“One out of 76 homes in Nevada went into foreclosure in January, for example, compared with one out of 173 in California, with Arizona and Florida close behind. In New York, by contrast, only one out of 2,271 homes went into foreclosure.<\/p>\n

“Nationwide, foreclosures fell 10% in January, to one out of every 466 homes. But that is a ‘mean’ average dominated by places like California and Florida. In the median state with the 25th highest foreclosure rate, by contrast, only one out of 949 homes was in foreclosure\u2014just one-tenth of 1%. Foreclosure rates were even lower in 25 other states. In Vermont, foreclosures amounted to just one out of 51,906 homes. Foreclosure can be a personal crisis, but it is not a national crisis.”<\/p><\/blockquote>\n

By 2011, a similar trend could still be found. From RealtyTrac, we find that<\/a> \u201cNevada, Arizona, and California post top state foreclosure rates for the year. More than 6% of\u00a0Nevada housing units (one in 16) had at least one foreclosure filing in 2011, giving it the nation\u2019s highest state foreclosure rate for the fifth consecutive year despite a 31% decrease in foreclosure activity from 2010.\u201d<\/p>\n

Those who lived through this economic disaster can remember the sweeping tracts of brand new and completely empty suburban housing developments that were reminiscent of Chinese ghost cities<\/a>, a zombie apocalypse film, or a neutron bomb having just gone off.<\/p>\n

Related<\/strong>: 5 Tips to Survive a Coronavirus-Induced Recession (& Thrive Afterward)<\/a><\/em><\/p>\n

These developments tended to be in the Southwest and Florida, the epicenter of the economic disaster. Here<\/a>, for example, is one new and completely vacant subdivision of mansions in Henderson, Nevada (a suburb of Las Vegas). Shockingly, not a lot of people are taking trips to The Strip to gamble ’til their heart\u2019s content in the middle of a deep recession.<\/p>\n

In the last quarter of 2007, NAR found<\/a> that housing prices had fallen 5.8% across the country year over year (and would keep falling for several years thereafter). Of course, this trend was not even close to evenly distributed. The “Foreclosure Five” had 10 of the 15 hardest-hit metro areas. The top three were:<\/p>\n