Last week on Wall Street was brutal, to put it nicely. We are on track for the worst week for the stock market since the start of the Great Recession in 2008, and the worst single day in history for the Dow Jones happened Thursday. The plunge in our markets reflects fear that the Coronavirus will continue to spread as it has in other counties, shutting down the supply chain coming out of China. As financial concern spreads into everyday households, here are several tips for you to remember, especially if you are currently shopping for a home:
- Stay Calm: Warren Buffet, the legendary investor, urged calm this week. In a quote from this article from Market Watch, he explains how the virus doesn’t impact the long term achievements of American companies. “You’ll notice many of the businesses we partially own, American Express, Coca-Cola — those are businesses and you don’t buy or sell your business based on today’s headlines. If it gives you a chance to buy something you like and you can buy it even cheaper then it’s your good luck. If something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments,” he said.
- Interest Rates: If there is a silver lining in the recent developments on Wall Street, it would be mortgage rates. The housing market continues to be strong (especially in Lexington), and with lowering rates it will continue to drive growth. Even before the crash this week, mortgage rates hit 8 year lows, with rates not seen since the recovery of the Great Recession. Homebuyers will continue to benefit from dropping rates as they shop for new homes, and existing homeowners may benefit from a refinance.
- Keep Perspective: During steep selloffs, it can be difficult to maintain perspective on the market and previous recoveries. In the last 2 decades the markets have seen several large corrections, along with an eventual, corresponding recovery. It’s never guaranteed, but in the long term the stock markets typically recover. This article from CNBC provides some history of corrections and corresponding recovery periods.
Ultimately, we’re in this together as the economy grapples with the Coronavirus. It remains an incredible time to buy a new home or to refinance, and as the next few weeks unfold, the situation for the housing market may only improve.