Your Home Value in a Recession

What will a recession do to your Home Value?

The last 10 years have been a great period of growth for our economy including our local economy which has boomed by more then 25%.  Utah’s median sells price is up from $211K to $275K over that period.  The question remains today whether there is a correction soon or whether housing prices can continue to grow. 

Looking back over the last 40 years there have been 5 significant national recessions.  Recession being a period of declining GDP for more than 9 months. 

The media as well as many economists are concerned that a recession is on the horizon bringing consumer confidence down and causing some individuals to pull the breaks on major purchases thus increasing the possibility of the next recession.

Housing prices are among the largest concern for most individuals when it comes to recessionary periods. 

It is easy for us to remember the 2008 recession as being devastating to the housing market causing significant declines in value.  Because of the recent memory of this recession a significant portion of consumers are waiting to purchase their next home. 

The next recession will be different.  Recessions happen for different reasons often causing confusing about what will or will not happen during a recession.  The Great Recession of 2008 and the great depression of 1929 had a broad impact on the entire economy causing retail sales, auto sales, housing prices, and commodities to drop or shrink drastically.  Other recessions like 1980, 1991, and 2001 recession were very different having a limited effect if any on housing but effecting other items like Banking system, technology companies, and retail sales dramatically. 

The next recession when it arrives which is inevitable is likely to have little to no impact on housing.  There are a few reasons why the Real Estate market is well positioned to handle the next recession with grace. 

·         1.Interest rates are already low and are still dropping.  In the beginning of the 2008 recession interest rates had crept up to near 6% leaving potential home buyers to completely pause when the first signs of the recession hit.  Rates then did not start their descent until we were heavily entrenched in the recession.  While the jury is still out to whether we will tumble into a recession interest rates have already started to fall dropping close to unseen lows. 

·        2. Supply of housing is low.  Because the real estate marketing is driven by supply and demand the fact that the housing market is short on supply is what is driving home values higher.  This is unlikely to changes as consumer confidence in the economy will keep people settled in their current homes.

·        3. Rental market is booming. The pricing tenants pay to rent a place to live helps drive the housing market.  If you are renting today, you likely noticed that you are paying a premium to rent a unit.  This will continue to drive renters to become home buyers.  CNBC is reporting that rents are likely to increase through 2020.

·       4. Utah’s and Washington Counties Economy distinctly different that the National Economy.  Utah & Southern Utah are expected to % grow year over year and ranks statistically as one of the fastest growing locations in the Country.  This will play a huge role in sustain our economy on a local level even when the National Economy struggles to maintain growth.  While parts of a recession will evidently hurt our local economy we will likely feel those struggles less than other metropolis areas.

·       5. Election year cycle. I must mention the impact of politics on the economy.  Our current Incumbent president will push continually to keep the economy working in a positive direction.  You’ll have noticed the news coverage with negative comments about the federal reserve being criticized and pushed to reduce lending rates faster to head off any head wind in the future on the economy.  This rhetoric will likely continue driving rates lower and incentivize buyers.

If you  desire to purchase a home but are hesitant due to the news of potential economic downturn recognize that with downturns always come rebounds and that the best time to buy a home is when you are ready to plunge into the role of home-ownership.  Don't let the media or the opinions of other direct what is best for your life.