62
THE THREAT
OF RECESSION
ON HOUSING
In a study examining the onset of
recession, realtor.com looked at how this
economic threat would impact housing.
While many fear a repeat of 2008 as other
countries including Germany and Britain
approach a recession, and the U.S. trade war
with China escalates, there may be less to
worry about than previously thought.
"is is going to be a much shorter
recession than the last one," predicts George
Ratiu, Senior Economist with realtor.com. "I
don't think the next recession will be a repeat
of 2008. e housing market is in a better
position."
Additionally, the majority of economists
and analysts believe the recession still has
at least a year before it arrives. Just 2% of
economists, strategists, academics, and
policymakers believe a recession will start
this year, according to a recent survey of
more than 200 members of the National
Association for Business Economics.
Meanwhile, 38% believe one will begin in
2020, while 25% anticipate one starting
in 2021. Fourteen percent expect it won't
materialize until after 2021.
In the event of a recession, how will the
housing market react? According to realtor.
com, it is unlikely that buyers will see a
serious crash, like the Great Recession, as
there are fewer homes being built and a
higher demand, especially from first-time
buyers. Additionally, the threat of recession
may make the inventory shortage even worse,
as would-be sellers may decide to postpone
listing until they can get top dollar for their
properties.
Another worry regarding a recession is a
possible increase in foreclosures. However,
like home prices, economists do not believe a
recession will create mass foreclosure like the
Great Recession did, due to tightened lending
laws meaning only qualified borrowers can
secure a mortgage.
"is time we won't have bad mortgages,
just people who are losing jobs," says
Lawrence Yun, Chief Economist of the
National Association of Realtors.
Additionally, more homeowners outright
own their home than before the recession.
According to analysts, with so many outright
homeowners and low foreclosures, any
increase in foreclosures will be minimal.
"Foreclosures will definitely increase, but
only because [the number of ] foreclosures
are [already] at rock bottom," says Andres
Carbacho-Burgos, a Senior Economist at
Moody's Analytics focused on housing. He
expects a recession will happen at the end of
this year or early next year, and last only two
or three quarters.
