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Inflation is higher, the economy is shrinking and the stock market remains volatile as forecasts are mixed on whether the economy will continue its downward trend or change course. Whether or not the United States is in a recession, the average American’s wallet probably looks much lighter.
But for anyone concerned about the housing market, there may be a silver lining. A broader economic downturn doesn’t necessarily mean the housing market will suffer, experts say. Additionally, conversations with real estate agents across the country suggest that most Americans are ignoring the headlines or talking about a slowing economy and continuing their efforts to buy or sell.
“We’re probably hearing this more from the media and other realtors than from consumers,” Steve Reese, a longtime realtor in Shawnee, Oklahoma, says of the recession. “I look at past recessions – and I’ve been through a few in my career – and it really tells me that a recession doesn’t mean a housing crisis.”
Reese’s observation is telling. The last real recession in the United States, other than the short, sharp one caused by the Covid-19 lockdowns, was caused by the housing market crash. House prices peaked in 2006, financial markets seized up in 2008, and the United States endured a long, painful recession that technically ended in 2009, but seemed to last much longer than that. But things are very different now, and current housing market conditions suggest that activity may continue to slow.
Extremely low housing supply has kept the market up
One of the main reasons things are different now is the lack of housing supply, which hit record highs earlier this year. By some estimates, the 2008 housing crash left the country with a shortfall of almost 4 million homes as residential construction companies went out of business and distressed properties fell into disrepair.
And while many Americans may have become first-time home buyers in recent years, there still isn’t enough supply to meet all the demand that exists, largely from the Millennial and Gen-Z generations. says Skylar Olsen, chief economist for Zillow.
The imbalance between supply and demand means that almost every time a home comes up for sale, there will be competition. This keeps real estate activity going, regardless of higher interest rates and house prices that have reached new levels every month this year.
Related: Compare current mortgage rates
The median sale price of an existing home hit a record $416,000 in June, up 13.4% from a year ago, according to the National Association of Realtors (NAR). This is despite a 14.2% drop in home sales over the same period.
While home sales began to decline around May, that wasn’t enough to allow listings to stagnate or homes to struggle in most markets. And with continued demand for homes that are listed, prices continue to rise, rather than slipping into a deflationary spiral.
Another key difference between today’s market and that of 2008 is that mortgage underwriting practices are different. During the subprime bubble, people were encouraged to take out mortgages they couldn’t pay off and didn’t need documents to prove they could afford it. Over the past decade, new regulations require mortgage applicants to demonstrate that they can repay the loan.
Has the housing market peaked?
Although there is still much debate about whether the United States is really in a recession, few people dispute that we are definitely in an economic downturn.
“It seems pretty clear that we’ve passed an inflection point,” says Zillow’s Olsen.
Hagan Stone, a real estate agent with Parks in Nashville, Tennessee, is one of many professionals who felt his business slowed from late spring to early summer.
“Until mid-June, people were paying way more than the list price, sometimes $200,000 to $300,000 more,” he says. “Since then, no customer has paid an overlist. People think more, and it’s better for our economy.
Stone says it’s better now because homebuyers aren’t making decisions “lest something else happens.”
Some housing experts see the economic warning signs as an indication that the housing market is heading towards a healthier state. Others are more skeptical.
Some housing watchers seem to have a “this time it’s different” mentality, says Ken H. Johnson, a housing economist and associate dean of graduate programs in Florida Atlantic University’s finance department.
During the 2008 housing crisis, house prices in many areas did not recover in value for nearly a decade after peaking, Johnson says, while acknowledging the extent of the downturn after the outbreak broke out. the subprime bubble. Still, Johnson notes that some caution is warranted now, as his research suggests the market may have peaked in June.
“I wouldn’t want to buy right now,” he says. “I would like to rent.”
Is it the right time to buy or sell a house?
It may sound corny, but the best advice on whether to buy, sell, rent, or stay put is very specific to your own situation.
Tim Hur, a real estate agent with Point Honors and Associates in metro Atlanta, says he sees “a little more normalcy in the market” and it’s “a little more balanced.” But Hur also acknowledges that some residents have been impacted by tech layoffs and stock and cryptocurrency losses, resulting in a shift in the pool of potential buyers.
If this describes you – working in an industry that is experiencing job cuts or is at risk of job cuts in the future – now could be a good time to rethink major purchases or loans. Also, if your down payment depends on somewhat speculative investments, you should carefully consider your options.
Hur, like many real estate professionals, says real estate is meant to be a long-term investment. In other words, if you’re buying a house now and possibly moving in a year or two, you’re at a greater risk of losing money or your home’s equity. Even as home prices continue to rise, there are costs associated with selling, buying and moving. You can use online calculators to visualize possible scenarios.
Another consideration: a slowdown, if it intensifies, will not have the same impact on all sites.
Johnson says he expects a sharply bifurcated national landscape between areas that already have “stagnant and even declining populations,” where house prices are likely to fall, versus markets that are benefiting from an influx of population, where prices could remain stable for some time.
It’s not an absolute negative or positive. As Johnson points out, areas with falling house prices may become more popular, or at least more livable, because they offer more affordable housing options.
But calculators and online research may not get you far. As Reese says, buying and selling a home is a very emotional process, and Americans have been through a lot in recent years.
“My gut tells me that a little more time without anything horrible happening, and [then] people realize that everything will be fine,” Reese says. “I think that will continue to be a positive outlook.”