It’s Friday, let’s sweep! |When will the next recession begin? Answer is…

Welcome to Friday, let’s sweep! This week I started out at our Eastlake office and shared the below content for discussion. As real estate professionals, people turn to us as one source for how economics impact the market and yet what they really want to know is how do market conditions impact me. When we speak to the “R” word = recession = it is important our vernacular is framed with an educated lens. We all remember the “Great Recession” – it was big. Let’s look at how Steve Harney and his Keeping Current Matters team is educating with respect to this juicy question, “When will the next recession be?

Let’s digest what Steve Harney has to say, in his words below paired with visuals below…


“And we’re going to start, as we always do, right with the news. Ladies and gentlemen, I want to give you a little bit of an update. The Wall Street Journal did a survey of economists and asked a question. When will the next recession begin? As you know, we want to keep you updated on that. We think that’s going to be a big issue. We don’t think the recession is going to cause much challenges in the market, but we are afraid it’s going to cause concern in the market. Meaning, I don’t think the recession is going to be anything like 2008. Morgan Housel said, “It might be over before we realized it began.” But, I’m a little nervous about people panicking over it since there’s so much talk to it, especially coming into a presidential election year. But, the Wall Street Journal did survey over 36 economists, and we added their results to our chart, which you have right in front of you now. So, we have four major surveys done by four major entities, the Pulsenomics survey, the Duke University survey, the National Association of Business Economics survey, and the Wall Street Journal survey:


So, there it is. You have that there, as you can see. And we lumped it together on the next slide. The almost 47 percent, 46.9 percent, think that the recession is going to occur before the end of next year, with another 28 percent saying it’s going to occur sometime in 2021, and much of that was early 2021. So, what we’re talking about is in the next 18 to 24 months, the vast majority of those analysts and economists surveyed think we’re coming to an economic slowdown.


Now, remember, I always want you to include this slide (below). Every time I’m talking about the recession, I’ll include this slide. You’re going to get sick and tired of this slide that’s how many times we’re going to include it. This is your home price change during the last five recessions. And obviously, in 2008, the recession of 2008, prices dropped dramatically because the number one trigger of that recession was housing crash and the number two trigger was a mortgage market meltdown.


So, of course, it impacted the housing industry because it was the housing industry that caused the recession. But, if we look at the four of the five recessions prior to that, home values actually went up, and the only time they didn’t, they went down by less than two percent. So, we don’t see prices dropping. If you have buyers, whether they be a first time homebuyer or a move-up buyer, that are waiting for prices to come tumbling down before they buy, let them know that’s not happening. As a matter of fact, we have the Projected Home Price Percentage Appreciation Going Forward by six major entities, the Home Price Expectations Survey, the Mortgage Bankers Association, Zelman and Associates, Freddie Mac, the National Association of Realtors, and Fannie Mae. And you can see that as far out as they project, some four years, most two years, as far as they project, they’re still looking at appreciation. There are no red numbers there. So, no one is projecting, even those economists that said that there’s an economic slowdown coming, are not projecting that prices are going to be impacted to a level that they’re going to start to depreciate. Appreciation has been decelerating, meaning we aren’t appreciating at the same levels that we have over the last couple of years. But, even that might change. Here’s the Forecasted Year-OverYear Change in Price by CoreLogic. Last year, the last 12 months, according to CoreLogic, prices went up 3.6 percent. But, they’re projecting that over the next 12 months – and here’s the breakdown by state – they’re projecting that prices will go up 4.5 percent. So, they’re really seeing a reacceleration of pricing. And I think that you’re going to see, in their next report, that that number is going to be over five percent. Again, there’s a lack of inventory with interest rates being so low. Buyers are out there. So now, that’s that supply and demand situation again.”

Ok, Laura’s voice returns here to this blog post! If you’d like to listen, read and digest the full 2019 Keeping Current Matters October report and do not have a KCM account – text me,  happy to give you access for a test drive. These reports come out after the 10th of each month and it is where I always start in digesting the macro news and industry updates.

Don’t yet have my cell # number plugged in? 206.227.7133

Happy Friday everyone! Thanks for reading along and staying current, it matters.

In partnership with you, as so grateful to be.

Laura Smith | Co-owner | Windermere Real Estate Co.


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