We all know what happened in the financial markets two weeks ago. Wall Street had its worst day of the year by experiencing an 800-point drop and the bond yield curve inverted thus signaling that the market sees short-term investments as being less risky than long-term ones. And then, sort of on the sidelines but front and center in many people’s mind, there is the continued trade war.

Homebuyers are feeling nervous about the future. Last month’s Realtor.com’s survey on consumer confidence reflects that nervousness. Its consumer confidence index fell -4.4% over the past year.

However, ATTOM Data Solutions tells us that only two (1990 and 2008) in the last five recessions saw home prices decrease by less than -1% and in the other three, prices actually increased.

Javier Vivas, the director of economic research at Realtor.com, does not believe housing is in nearly as much trouble as it was in 2008. “The short term impact to housing is less likely to be as reactive. The impact of the last recession is still fresh in our minds and can have a play in homebuyer psychology BIT barring weak fundamentals, housing tends to perform fairly well during recessions. Over-construction is largely what got us into trouble last recession, and we’ve experienced just the opposite since then.”

Vivas believes that low mortgage rates are giving a “second wind” to buyers despite continued lack of inventory, not the stock market, being the real force dampening sales.

According to the National Association of REALTORS ® chief economist, Lawrence Yun, is less sanguine. He thinks the Federal Reserve will be forced to cut mortgage interest rates further to compensate for “a policy mistake of trade war rhetoric.” (Of course, further rate cuts could boost the housing sector.) He also thinks that even financially healthy businesses may be unwilling to spend on expansion and that investors are unhappy about a prospect of slowing global commerce that could result in a Wall Street sell-off.

Yun does, however, believe there is time to get the economy “back on track” with solid GDP expansion and job creation. “Make it clear that the federal government will allow businesses to pursue ways that are most efficient and convenient, including foreign transactions. Such conditions will boost the economic outlook and get the bond yield curve away from inversion.”

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