In my business of real estate there are 2 questions looming in everyone’s mind. Will we see another recession in 2019/2020? If there is a recession, what will it do to the housing market? There is much talk in this upcoming Presidential election year about the economy. Its easy to collect historic data, but predicting the future is much harder. Depending on which side you listen to either “the sky is falling” or “it is wonderful and will only get better”. Most businesses seek facts rather than emotional appeal.
First let’s look at the definition of Recession as the economists define it. A recession is a period of 2 consecutive quarters where the GDP slows. One of the most reliable sources of information on the housing-market-future is the Keeping Matters Current group headed by Steve Harney. In July 2019 they collected data from 3 reliable sources: the Wall Street Journal survey of economists, the Duke survey of CFO’s, and the Assn. of Business Economists survey of its membership. There is a consensus that we will see some adjustment nationally in the next 18 months. The key word here is adjustment. Generally housing appreciates around 3% annually. In the past 3 years it has grown at a much higher rate in most areas of the U.S. . The expected “adjustment” will just be a slow down so the market can readjust to the 3% average overall trend. There will not be a repeat of the 2008 housing bubble crash where homes lost major value and the housing market was decimated by the failure of Fannie and Freddie. In some of the recessions there was still even a modest housing price gain.
So the bottom line is prepare for a slight adjustment but don’t panic about a major change. The interest rates are still at a phenomenal low. Homeowner interest rates are still in the 3% range. Investors are finding 4% to 5% interest rate which is a great rate for investors. And inventory is in balance with demand in most areas. Look for 2020 to be normal with a slight adjustment some time in the next 18 months.
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