Zillow Predicts Next Housing Recession in 2020
Sometime in the next five years, the housing market in the U.S. could enter a recession by 2020. In a recent research report by real estate company Zillow polled 100 real estate experts and economist about housing market predictions. The company disclosed that nearly half of all respondents predict the next recession will commence the first quarter of 2020 with the main culprit for the housing recession being “monetary policy”.
"As we close in on the longest economic expansion this country has ever seen, meaningfully higher interest rates should eventually slow the frenetic pace of home value appreciation that we have seen over the past few years, a welcome respite for would-be buyers," said Zillow senior economist Aaron Terrazas in the research report. "Housing affordability is a critical issue in nearly every market across the country, and while much remains unknown about the precise path of the U.S. economy in the years ahead, another housing market crisis is unlikely to be a central protagonist in the next nationwide downturn."
KEY TAKEAWAYS
The U.S. housing market has recovered from the 2008-09 financial crisis, with home prices exceeding the pre-collapse valuation in many areas.Despite a record bull market over the past decade, the housing market in the U.S. could enter a recession in 2020, according to Zillow.This prediction is based on their own outlook combined with results from a survey of homeowner sentiment.
If the survey respondents' predictions prove true, the current economic expansion will be the longest ever recorded. While a housing collapse ushered in the Great Recession of 2008 and 2009, most survey respondents don't think a downturn in the economy will be centered on the housing market this time around. They think the Federal Reserve's actions when it comes to interest rates will be the biggest reason for the looming recession. After all, if rates go up, it will be costlier to take out a mortgage, shutting some buyers out of the purchasing process. They noted that, if the Fed raises rates too quickly, it could slow down the economy and thus lead to a recession.
Less than a year ago, survey respondents were more concerned with geopolitical issues, citing a crisis on that front as the most likely cause of a future recession. Those worries are now below monetary policy concerns; other concerns are focused on a trade war with China, a stock market correction and unexpectedly high inflation. Those same respondents expect the housing market to continue to grow, with home values expected to rise 5.5% this year. At this time a year ago, the real estate experts thought home values would increase 3.7% this year.
"Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for U.S. home prices," said Pulsenomics founder Terry Loebs, which conducted the survey for Zillow. "These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers."
Source:
Fuscado, D. (2019). Next Housing Recession in 2020, Predicts Zillow. Investopedia. https://www.investopedia.com/investing/next-housing-recession-2020-predicts-zillow/