Can hot market areas survive a recession?

[Ammar Ali]

News and fears of an upcoming recession have many speculators are saying the markets will crash sometime later this year. Tampa Bay has only seen increasing demand for houses with supply that can barely keep up. In such a high demand market like Tampa, do y'all think such a market could be impervious to the effects of the upcoming recession?

[Patricia Steiner]

We're not in a bubble here in Tampa.  We're in a serious housing crisis of more than 8 years in the making and made even more critical by more than 200 people moving here EACH DAY.  Recession or not, property and rental prices are going nowhere but up.  Basic economics:  Demand exceeds Supply.

Just is...

[Alicia Marks]

Great question! I don't think any market can be impervious to nationwide market changes completely. Tampa has seen a great growth, but much like my market in DFW, it's in part due to relocation. Part of the risk of great, fast growth is that it risks coming down disproportionately to the rest of the nation as well. I''m following Dave Meyer/ On the Market because I think he's sharing good data without inciting fear like many others trying to capitalize on sensationalism.

[Josh Green]

 I follow a few different youtube channels and they use a lot of data to make their claims.  With them, I argue that the 'crash' has already begun.  How soon it will start in certain markets, how much it will drop prices, or how long it will last are questions we cannot know but I'm guessing markets will drop 10-30% (some areas more, others less).  Tampa/St pete is not going to be one of the earlier cities to experience a correction, but do keep an eye out on north port/sarasota/ft meyers.  I think that part of the state will be one of the earlier parts and potentially hardest hit.

[Mike Terry]

Do you have any stats to back up these predictions? I'm in Lee County and we are getting an influx of Tampa and South Florida buyers that are priced out of those markets.  There is some softness at the top of the market, but median priced homes are still getting multiple offers. 49% of purchases are cash sales.  Most of our buyers are move ins from higher priced states so equity rich buyers still feel our market is affordable.  We all believe that price growth needs to stall, but there are no indications of any decrease in median or average sales prices. Corrections happen for a reason not because of feelings. 

[Bruce Woodruff]

Hot markets are always hot....

[Marcus Auerbach]

Google: median home price FRED and you'll get a chart since WWII and you can see how much home prices went down during recessions. Hint: they didn't.

US home prices will continue to see upward pressure until we have more sellers than buyers. And that will be a while. I am using Milwaukee numbers because I know them by hard: 2015 was a neutral market and the last year that was NOT a sellers market.

We had about 12,000 homes for sale and sold on avergae a little over 2000 per month. At the moment we have about 2,000 for sale and sell about 2,000 per month. And 60% of them have 5, 10 or more offers.

We need demand to shrink to a fraction of what we have now, either because buyers don't want to buy anymore (and prefer to rent) or they already have bought. And also we need supply to multiply, but net supply only increases if someone dies or if you build a new unit. So it will be a while.

[Charles Clark]

Bom dia @Ammar Ali,

I hope all is well with you mentally, physically & spiritually.

I believe the markets will survive because there is a shortage of homes available compare to buyers wanting to buy. This market isn't built on the things that the 2008 market was built on, so I don't see a crash happening anytime soon. As long as businesses are doing business and are able to pay their employees then I believe hot markets will stay hot. Employees also have more power with the ability to work remotely so this will add fuel to those hot markets and neighborhoods surrounding them. With employees having the option to work remotely they are able to buy in areas they might of not considered due to location of their employment. This is a gamechanger to the real estate market and I think will keep markets hot for at least 2-3 years.

I hope this answer your question. If there's anything I can assist you with, please do not hesitate to contact me.

Beleza,

Charles Anthony

[Paul Kingsley]

What I'm looking at is whether the velocity of household creation (e.g., millenials moving out of their parent's homes or out of roommate situations due to lack of affordability or a weaker jobs market) slows down and whether the relocations to hot markets starts to cool off.  While I agree we shouldn't see something like the 2008 collapse in values because of way better underwriting standards and lots of equity in existing homes (and the huge supply/demand imbalance), it is possible markets like Tampa, Phoenix, Austin, etc. drop back to flat appreciation.  With affordability at multi-decade record lows, people may choose to just keep that roommate or continue to live with parents.  And if the anticipated swing in the jobs market occurs in the next 6 months, employers may feel more emboldened to require remote working employees fleeing the midwest to actually stick around and come into the office.  One of the things we saw in Phoenix in 2008 was a rapid slow down in relocations (actually to net negative growth) because the builders slowed to almost zero and people in the midwest were locked into their homes because they couldn't sell them.  Also we saw a lot of people delay retirement due to the stock market collapse.  This time we may see a slightly different ripple effect in that the executive in Carmel, IN who was going to relocate her family to Tampa to work remotely may suddenly be subject to in office requirements and also may not be willing to sell that $800,000 house with a $650k mortgage at 2.9% to go live in a much smaller house in Tampa with a 5.5% mortgage.  Or the couple from Dayton who was going to retire early next year and move to Nashville where their grandkids live has just lost a lot of value in their 401k due to the 20% pullback in the stock market and decides to work for another couple of years and delay the move.  Just a few things to consider in gauging whether the hot relocation markets are impervious to recession risk.

[Austin McClain]

In Columbus, we're just not building enough homes to keep up with the population growth. Growth may slow, but I don't think it will be a drastic decrease because the supply and demand are so off right now. 

[Edwin Epperson]

@Ammar Ali I live in Tampa, and work here as a PL.  I have been a PL for over 7 years.  I'm not sure If I can attach my quarterly market report but I will try.  Its below.  Personally, I think the next "correction"/ "recession" will not be macro market-focused, yet micro market-focused.  Primarily this is due to technology and the ability for relocatees to determine which markets they want to live in all driven by data.  People may not want to talk politics but they do play a role in where people live.  Whether it's because of personal feelings one way or the other, or because big corporations are relocating to geographical areas that provide tax advantages, politics can influence these decisions, and as we have seen over the past couple of years, they influence no more than ever.  Florida as a whole is seeing more businesses and corporations relocate to this state, and with their allocation drives job growth and demand.  However, there are markets whose demand is being driven up beyond sustainable levels.  When the correction happens, and it's coming, those over-inflated markets will come down to reasonable demand levels.  Investors and leveraged homeowners will see this as a "recession" while in reality, it's simply a correction back to actual values.  INHO, markets in jeopardy of this correction most likely will be Tampa, Miami, Naples, and the stretch of MSA's between Tampa, and Naples.  I could very well be wrong, but those are my thoughts.  

[Ryan Kelly]

People tend to react in extremes. Now that interest rates are starting to "slow down" the record pace of housing appreciation, some immediately say it's a "crash." In reality, the current shift is closer to this comparison. If you drive your car on the highway and push the gas pedal all the way to the floor, your car would accelerate at maximum speed (past two years of housing). Now take your foot off the gas pedal. Did the car immediately go backward or remain moving forward at a slower pace? Because of low housing supply, slower demand won't immediately set prices going backward, just slower forward or flatter on appreciation. That's a good thing as it will give rents time to improve and buyers time to adjust to inflation with higher rates. We will see an increase in price reductions and longer days on market for all the homes that weren't properly priced for this shift, but the overall median price for communities may stay intact. We're slowly returning to a more predictable and less aggressive sellers' market where a well-priced home should sell around that price, not 10-20% over. Markets with strong job growth and population growth will still see healthy demand even with higher interest rates, it just takes time for buyers to adjust.

[Joshua Janus]

Quote from @Ammar Ali:

News and fears of an upcoming recession have many speculators are saying the markets will crash sometime later this year. Tampa Bay has only seen increasing demand for houses with supply that can barely keep up. In such a high demand market like Tampa, do y'all think such a market could be impervious to the effects of the upcoming recession?

In markets like Columbus, Ohio the population has been growing year over year for the last decade faster than most of the comparable cities and the price per square foot is low which creates an opportunity for investors. The cash flow in the midwest is great and if you combine that with a growing city, you set yourself up to do well over time.

Check out The Complete Guide to the Columbus, Ohio Real Estate Market which goes through the Columbus, Ohio market in depth and will give you a better scope of where the highest levels of growth are taking place and where to look to invest.