Winners and Losers This Time Are Different From 2008

The human inclination to compare the past and the present is irresistible. So looking for parallels between this economic downturn and the financial crisis of 2008-09 is natural, particularly given the alarming levels of unemployment and declines in economic output in both events.

But as the worst of the coronavirus health crisis eases, at least for now, we're seeing that there are meaningful differences between the last downturn and this one. The epicenters of the last crisis -- the housing market, household finances and the banking system -- are holding up better so far, while areas of strength coming out of the Great Recession -- the oil industry and urban real estate -- look murkier. This is due to differing economic fundamentals coming into the crisis, policy choices made by Congress and technological change.

No industry epitomizes the difference between this crisis and the last more than housing. Although the market collapsed in March and early April as shelter-in-place orders went into effect -- scaring investors with memories of the severity and duration of the meltdown a decade ago -- we've seen several indicators suggesting activity has bounced back during the past month. Online real-estate brokerage Redfin says buyer demand has already recovered to pre-coronavirus levels. Mortgage-purchase applications have increased for four weeks in a row, and are now down only 9.5% year-over-year.

Not Bad, All Things Considered

Meritage Homes, which develops luxury and senior housing, says that momentum built during the latter half of April has carried over to May, and it expects May orders to match last year's. A stable housing market with 15% unemployment may not be sustainable over the long run, but it's what we have at the moment.

Another area of surprising stability so far, given the high level of unemployment, is household finances. This is mostly due to the $2 trillion CARES Act passed by Congress. Between the one-time relief checks sent to Americans and the additional $600 a week in federal unemployment benefits, most unemployed workers, particularly at the lower end of the income scale, have been made whole so far.