Is The Recession Coming & Will It Impact The Housing Market?

Last week was a crazy week in the equity markets, and depending on what you're reading out there, there are some very scary headlines.

CNBC, "Dow Tanks 800 Points in Worst Day of 2019," Fox, "Recession Coming: What Economists Think," and, of course, NPR, "What Economic Indicators Are Telling Us About a Potential Recession." These headlines admittedly can be a little overwhelming. So let me cut to the truth as it relates to the real estate market, the real truth.

We are currently in the longest economic recovery in American history. A recovery will end when we see an economic slowdown, and an economic slow down can be defined by two consecutive quarters that the gross domestic product slips. This is also the definition of a recession when you have the GDP slipping for two consecutive quarters.

So here is the important and key point: a recession is not a housing crisis.

In fact, in the last five recessions only two have had a negative impact on home prices. The one that had the most impact, 2008, the most recent recession, was caused by the housing and mortgage markets, so naturally we saw home prices hit pretty hard.

 
In the last five recessions, only two have had a negative impact on home prices

In the last five recessions, only two have had a negative impact on home prices

 

But in three of the past five recessions, home prices actually rose and if we look at the indicators of any upcoming recessions, they are not actually linked to housing. Rather any potential recession is more likely associated with trade Wars and current bumpy geopolitical climates.

In other words, do not let these scary headlines and the thought of recession lead you into believing we are heading for a housing crisis.

It’s an unprecedented time for buyers

Right now we are actually witnessing an unprecedented time for buyers. The market is supremely opportunistic and the interest rates are incredibly low, historically low. We don't usually see a pairing of opportunistic prices with low interest rates.

So even if the recession is forthcoming, as I said, it does not mean the end of the world for housing. If the recent volatility of the stock market is making you weak in the knees, consider investing in the safest market there is: real estate.

Interested in learning more about the current state of the real estate market? Contact us today!