What with Germany’s economy on the brink, Great Britain’s disorderly and unprecedented exit from the European Union and the escalating trade war between China and the US, it has become increasingly difficult to ignore hearing and seeing the word “recession.”

Most recently, a group of some 200 economists, strategists, academics and policy makers via a survey by the National Association for Business Economies listed their predictions about the time frame of a “next” recession. 2% of these experts predict a recession will hit this year; 38% predict a recession in 2020; 25% predict a recession in 2021, and 14% predict a recession hit after 2021.

Clare Trapasso examined some potential consequences for real estate in the event of a recession for Realtor Magazine. Here at Harris Real Estate Coaching, we are looking at some of Trapasso’s thoughts and conclusions in this two-part series on possible consequences for real estate IF a recession were to hit:

Unemployment and Incomes

Trapasso points out that unemployment rates have been remaining around its lowest levels in the last 50 years. The whispered problem about unemployment rates is that there have not been as many new jobs as have been reported in all of 2018 and early 2019.

Wages are still growing but only slightly. And certainly, wages have not been growing nearly as fast as home prices have been appreciating.

IF a recession were to hit within the next two years and IF ongoing trade wars (China, Mexico, Canada, the European Union) were to become prolonged, unemployment would rise due to jobs disappearing, wages would likely remain, at best, stagnant and everything would become more expensive for consumers.

Already, 56% of potential homebuyers have indicated in a most recent survey by realtor.com that they would stop searching for houses if/when a recession would hit.

Home Prices and Sales

With more Millennials coming of home-buying age within the gigantic Millennial generation, most industry experts do not anticipate any drop-off in demand for single-family housing.

The problem with that demand is there simply are not enough homes being built to satisfy that single-family appetites. This lack of supply would most likely be exacerbated if a recession were to hit because builders would most likely pull back even more from building even more than they are today. And, in terms of existing home supply, it’s likely potential sellers would just postpone putting their house on the market until they think they’d get a top, or, at least, a better, price.

Thinking of buyers, it may become more difficult to find and hold a good paying job and/or steady freelance work if a recession were to hit. The consequences of that are twofold: fewer potential buyers would be able to afford to buy and even if gainfully employed, potential buyers may feel a heightened sense of anxiety about job security/sustainability.

According to Ali Wolf, the director of economic research with Meyers Research, “If we do go into a recession, there will be layoffs. If you move from a two-income household to a one-income household, it doesn’t change the desire to own…but it does impact the ability.”

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