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Marcus Auerbach#3 Starting Out Contributor
  • Investor and Real Estate Agent
  • Milwaukee - Mequon, WI
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Concerned about economic slowdown?

Marcus Auerbach#3 Starting Out Contributor
  • Investor and Real Estate Agent
  • Milwaukee - Mequon, WI
Posted Apr 3 2019, 07:04

I am generally NOT concerned with the real estate market - in fact I think I would appreciate a little cool down. We are shorter in supply and higher in demand this year so far than we have been before. I have recently posted statistics for Milwaukee 2019 YTD - both DOM (days on market) and inventory for sale are down - again - over last year. In particular in the lower price points below 250k.

Looks like the world economy is starting to slow down a bit, bond yield curve inversion in March suggests the fed should cut rates to support weakening investor faith in the economy, global shipping is down etc. - so what could that mean for real estate? Here is some info from a very credible source (KCM) about what happened to US property values in the last 5 RECESSIONS.

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Last week, realtor.com released a survey of active home shoppers (those who plan to purchase their next home in 1 year or less). The survey asked their opinion on an impending recession and its possible impact on the housing market.

Two major takeaways from the survey:

  • 42% of home buyers believe a recession will occur this year or next (another 16% said 2021)
  • 59% believe the housing market would fare the same or worse than it did in 2008
Why all the talk about a recession recently?

Over the last year, four separate surveys have been taken asking when we can expect the next recession to occur:

  1. The National Association of Business Economics

70% of all respondents to the four surveys believe that a recession will occur in 2019 or 2020 with an additional 18% saying 2021.

However, we must realize that a recession does not mean we will experience another housing crash. According to the dictionary definition, a recession is:

“A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”

During the last recession, a dramatic fall in home values helped cause it.

However, according to research done by CoreLogic, home values weren’t negatively impacted as they were in 2008 during the previous four recessions.

Home price change is the last 4 recessions:

During the four recessions prior to 2008, home values depreciated only once (at a level that was less than 2%). The other three times home values appreciated, twice well above the historic norm of 3.6%.

Bottom Line

If there is an economic slowdown in our near future, there is no need for fear to set in. Most experts agree with Ralph McLaughlin, CoreLogic’s Deputy Chief Economist, who recently explained that there’s no reason to panic right now, even if we may be headed for a recession.

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