Recent reports seem to hint at the dreaded economic “Big R” [Recession]. According to the 2019 Zillow Home Price Expectations Surve, released June 5, 50% of the surveyed economists, investment strategists and housing market analysts believe the next recession will begin in 2020, with 19% predicting it will begin in the third quarter. When asked what might trigger a recession, these same experts replied: trade policy; stock market correction, geopolitical crisis. Notice the absence of the housing market in their analysis.
Since the real estate market was a major target in the last recession, there is reason for concern. The good news for property owners is that these same experts continue to see reasonable appreciation into 2021. Specifically, they forecast 4.1% this year, 2.8% in 2020 and 2.5% in 2021.
Because of the restrictions placed on lending since 2008, the “under water” state of homes is largely a thing of the past. While housing isn’t expected to be problematic on a national level in the next recession, some markets will likely take bigger hits than others.
Experts say that most homeowners are in a good place with the predicted slow-down of the economy. Even if home values experience a dip on a national scale due to the slowing economy, it would not instantly lead to foreclosures. The housing crisis in the Great Recession was caused largely by the fact that job loss was combined with the fact that most homeowners did not have much equity in their homes. For the most part, homeowners aren’t making the same mistakes as a decade ago, and they have more equity in their homes, especially if prices drop. Unemployment rate is also at an all-time low.
Bottom line: Relax! If you can continue to make your mortgage payments, you are in a good place. Yes, there may be some minor real estate adjustments in housing values, but we are not looking at any severe drop in home equities.
