Recessions And Real Estate
We just came back from a week away at a conference with the best economists, investing experts, and real estate professionals in the country. As we expanded our knowledge, we discussed and planned for the future of our industry and worked on the ways to serve our clients best. One of the biggest talking points at the conference was the fears of a recession along with what kind of recession we might be entering.
Over the 4 days of the Summit, the stock markets dropped at first only to start rising again before repeating the cycle once more by the end of the week. The talks of recession and the collapsing housing market filled all news feeds and the discussions at the conference. The current news cycle is latching onto every possible bad news to forecast the recession, such as the Wall Street Journal publishing a piece “An Economic Warning Sign: RV Sales Are Slipping” and many more…
What should we expect in the next year or two? Is it still a good time to buy a home? Here are the facts:
- We are in the longest economic recovery in American history.
- What would end this recovery are two consecutive quarters of GDP slipping, the definition of a recession.
- Recession does not automatically mean the housing crisis. The home prices were growing in 3 out of 5 last recessions. The only significant home prices drop happened in 2008 recession and that one was triggered by the housing and mortgage markets in the first place.
- Most economists agree that the next recession will be triggered by trade wars, stock market correction or an unforeseen geopolitical event.
- The same economists believe that the home prices will be growing for the next 5 years. This is supported by the builder’s confidence – new single family home starts are up by 1.9% comparing with the last year.
- The next recession most likely will resemble the recession of 2001 when the stock market dropped by 25% and the home values increased by 6.6%.
- Mark Twain said – “Buy land, they're not making it anymore”. It is expected that during the next downturn, the investors will be pulling money out of the stock market and buying the safest asset that exists – real estate.
Elena & Michael Talis