Homebuyers Shouldn't Worry About 2008 All Over Again
Last week, realtor.com released asurvey of active home shoppers (those who plan to purchasetheir next home in 1 year or less). The survey asked their opinionon an impending recession and its possible impact on the housingmarket.
Two major takeaways from the survey:
- 42% believe a recession will occur this year or next (another16% said 2021)
- 59% believe the housing market would fare the same or worsethan it did in 2008
Why all the talk about a recessionrecently?
Over the last year, four separate surveys have been taken askingwhen we can expect the next recession to occur:
- The PulsenomicsSurvey of Market Analysts
- The Wall StreetJournal Survey of Economists
- The DukeUniversity Survey of American CFOs
- The National Association of Business Economics
70% of all respondents to the four surveys believe that arecession will occur in 2019 or 2020 with an additional 18% saying2021.
However, we must realize that a recession does not mean we willexperience another housing crash. According to the dictionarydefinition, a recession is:
“A period of temporary economic decline during whichtrade and industrial activity are reduced, generally identified bya fall in GDP in two successive quarters.”
During the last recession, a dramatic fall in home values helpedcause it.
However, according to research done by CoreLogic, homevalues weren’t negatively impacted as they were in 2008during the previous four recessions:
During the four recessions prior to 2008, home valuesdepreciated only once (at a level that was less than 2%). The otherthree times home values appreciated, twice well above the historicnorm of 3.6%.
Bottom Line
If there is an economic slowdown in our near future, there is noneed for fear to set in. Most experts agree with RalphMcLaughlin, CoreLogic’s Deputy Chief Economist,who recently explainedthat there’s noreason to panic right now, even if we may be headed for arecession.
“We’re seeing a cooling of the housing market,but nothing that indicates a crash.”