Is 2020 recession happening ?

Question

Is 2020 recession hapening and how will it affect the real estate prices ?

Joe Villeneuve · Answer

It will be just like the one that was predicted for 2019, or was it 2018.  Maybe it was 2017,...no, I think it was 2016.  Come to think of it, I'm positive it was 2015.  Yes, that was ...no, wait, my bad.  It was 2014.  That was it.

Ok.  I'm wrong...I'm sure it was,...no, that can't be right.  It had to be 2012...or 2011,...or 2010,...or 2009,...or...

OK.  I admit it.  It's been predicted so many times, I lost track of when it actually happened.  It has happened,..hasn't it?

Joe Villeneuve · Answer

...and the third side, it's an opportunity

Russell Brazil · Answer

Yes we are likely heading into a slowdown. Prices of real estate are not typically affected on a national level by recessions. However on a micro level, some markets are more sensitive to national recessions. Focus on the microeconomics of your market and ignore the macro

Evan Polaski · Answer

@Luka Friganovic I was thinking we would have more "if candidate x gets elected" or if president trump gets reelected...

I agree with others, the fundamentals coming out of 2009/10/11 are vastly different than they were coming out of the early 2000's recession or the 90's recession, or the 80's recession.  We never saw the huge jump in GDP growth like the others.  Just chugging along at 2% growth, year after year after year.

I do think housing prices are becoming unsustainable for many, but that is also due to larger trends of people don't want to live in the exburbs like they did a few decades ago.  Older people are moving into urban areas, younger people are moving into urban areas and the immediate surrounding suburbs.

So while pricing is overly high, I also don't see the dynamics of what people want changing, which will keep strong pressures on house pricing.  And the 1/2 point drop in fed funds rates going into spring buying season will only keep prices high, if not higher.

As for commercial investments, I think we will see a correction in next 3-5 years.  Cap rates are starting to push so thin that you can get similar returns in more liquid options.  But I think this will mainly effect the tertiary markets, and lower quality assets.  Primary and secondary markets, class A and B assets will probably only see a very slight drop in valuation.

That's my opinions.

Bob B. · Answer

Housing affordability isn't a problem.

The house I owned in 1984 would have had a $130K Mtg at 14% and a monthly payment PI of $1540.  My payment was less because I assumed a 12.5% floating LIBOR loan I never really understood but was glad to have it.

The same house today could have a $350K Mtg at 3% and a monthly payment PI of $1475.

There are plenty of lower priced houses in the area that will have a much lower mortgage payment than what I had in 84. The problem is too many potential homeowners have no self control when it comes to spending and credit.  They have student loans, credit card debt, 18 months same as cash for disposable furniture and at least one car payment.  Not to mention a couple of $4.00 coffees a day and no clue what brown bagging is.

I'd bet that most college grads spent more time learning the ins and outs of student loans than budgeting and financial planning.  It's the school and parents fault.

This is why there are so many renters and it's not going to change anytime soon.

I'll get off my soap box now.

Kenneth Garrett · Answer

@Luka Friganovic

In my area I see it as a correction.  The higher end flip market is soft and new first time home buyers are all maxing out on there pre-approvals.  I agree with @Joe Villeneuve I wish they would stop trying to predict this so called recession.  It only makes buyers nervous and it’s just noise.  Hopefully the fed cut of interest rate of .005% (half a point) will help the market.

Matthew Paul · Answer

For one side its a recession for the other side it a correction .

Mike Dymski · Answer

We have seen thousands of recession posts on this site since 2014, all based on conjecture about high prices and cap rates.  The conditions and concerns are different now...GDP is expected to be in recession territory for Q1 and Q2 2020 due to supply chain disruption, decline in exports, travel restrictions, and reduced consumer spending all from the virus.

Joe Villeneuve · Answer

I would take it a step further, and say you should always be focusing on the micro levels.  When I analyze I'm always searching to find the micro-markets.

Markets are like the rain.  Somewhere across the street, it's not raining.  Somewhere across the street...it's a different market.

Is 2020 recession happening ?

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