Recession? Yes. Housing Crash? No

Dated: April 13 2020

Views: 8

With over 90% of Americans now under a shelter-in-place order, many experts are warning that the American economy is heading toward a recession, if it’s not in one already. What does that mean to the residential real estate market?

What is a recession?

According to the National Bureau of Economic Research:

“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

COVID-19 hit the pause button on the American economy in the middle of March. Goldman Sachs, JP Morgan, and Morgan Stanley are all calling for a deep dive in the economy in the second quarter of this year. Though we may not yet be in a recession by the technical definition of the word today, most believe history will show we were in one from April to June.

Does that mean we’re headed for another housing crash?

Many fear a recession will mean a repeat of the housing crash that occurred during the Great Recession of 2006-2008. The past, however, shows us that most recessions do not adversely impact home values. Doug Brien, CEO of Mynd Property Management, explains:

“With the exception of two recessions, the Great Recession from 2007-2009, & the Gulf War recession from 1990-1991, no other recessions have impacted the U.S. housing market, according to Freddie Mac Home Price Index data collected from 1975 to 2018.”

CoreLogic, in a second study of the last five recessions, found the same. Here’s a graph of their findings:Recession? Yes. Housing Crash? No. | Simplifying The Market

What are the experts saying this time?

This is what three economic leaders are saying about the housing connection to this recession:

Robert Dietz, Chief Economist with NAHB

“The housing sector enters this recession underbuilt rather than overbuilt…That means as the economy rebounds – which it will at some stage – housing is set to help lead the way out.”

Ali Wolf, Chief Economist with Meyers Research

“Last time housing led the recession…This time it’s poised to bring us out. This is the Great Recession for leisure, hospitality, trade and transportation in that this recession will feel as bad as the Great Recession did to housing.”

John Burns, founder of John Burns Consulting, also revealed that his firm’s research concluded that recessions caused by a pandemic usually do not significantly impact home values:

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”

Bottom Line

If we’re not in a recession yet, we’re about to be in one. This time, however, housing will be the sector that leads the economic recovery.

Blog author image

Kathleen Comerford

Let The Comerford Group Be Your Key to Your Real Estate Success! I am a Broker and REALTOR, connecting buyers and sellers around the world. The Comerford Group is able to provide customers with excep....

Latest Blog Posts

How to Set Up the Perfect Home Office

For some, it’s a dream to work from home. But once you finally get your remote job, you might be surprised to learn that kicking back on the couch isn’t going to get the job done. Having

Read More

Sarasota Named One of the Best Places to Live in the U.S.

The U.S. News and World Report's annual "Top 10 Best Places to Live in the U.S." report has ranked Sarasota No. 9 in their 2021-2022 edition. The list ranks metro areas taking into account

Read More

Older Homes, New Trend: Tips for Improving Comfort and Energy Efficiency

Older homes tend to require upgrades that houses constructed after standards for energy efficiency came into widespread use do not. Buying an older house may mean living in a property with history

Read More

7 Best Tips for Homeowners in Florida During the Summer Months

The summer months in Florida can be grueling and especially hard on our homes.  Homeowners in Florida can avoid any added stress and unforeseen repairs with regular  maintenance checks.

Read More