Unless you’ve been living off the grid, I’m sure you’ve recently heard or read talk about tariffs, trade wars, political drama, Fed rate adjustments, and perhaps even a looming economic recession.
Rather than fear the unknowns that come with recession talk, I want to highlight some historical facts on recessions and how they generally impact real estate markets…for the better. Yes, you read that right. For the better.
Here is a great perspective from a well-known mortgage management and market commentator, Doug Wilken.
“Recessions are a fact of the economic life cycle; however, they are triggered by different events. Most recessions last less than one year and are almost over before officially being labeled a recession by two consecutive quarters of negative GDP.
The most recent Great Recession of 2007 — 2009 was extreme in that it involved a complete meltdown of housing, mortgage lending, financial institutions, auto industry, along with a global financial crisis. The only other recent recession that could come close in magnitude was 1973 — 1975 with an oil crisis, stock market crash, wage and price controls that drove up unemployment and change with gold standard and U.S. dollar.
Those two recessions are not normal. A recession will happen within the U.S. sometime over the next 1-3 years. The current expansion period is the longest on record between recessions. At this time indicators are that the recession may be impacted by low inflation, global economies, and/or trade wars that drive down consumer spending. The typical, historical impact during a recession is home values increase slightly and mortgage rates decrease slightly.
A summary of the past 6 recessions (dating back to 1975)
Home values increased 1-3% in last three recessions that did not involve housing or financial industry.Mortgage rates initially worsened in early part of last six recessionsMortgage rates decreased at 4-5% change (0.3% to 0.5% in rate) in the last two recessions that lasted 8 months or lessMortgage rates increased at a 3% change (0.24% in rate) in the the last recession impacted partially by low inflation”
We can’t control global or local economics but we can understand them and react accordingly. Market fluctuations come and go but houses are solid and stay put! Everyone needs a place to live, and that has always been the joy of home-ownership. Currently, mortgage rates are excellent for new purchases and refinances.
This is the time of year where the market tends to balance a bit from a seller’s market to an equal market for both seller and buyer’s market. As your trusted real estate advisor and Realtor, I welcome the opportunity to help you navigate the sale of your home or the purchase of a home as we finish out 2019. It’s been an excellent year for real estate transactions and it’s not over yet.