Fears of a recession, which analysts have been predicting is on the horizon, are causing some otherwise interested home buyers to put their plans on hold.
Most house hunters believe a recession will hit this year, or within the next few years, Realtor.com found in a recent survey.
And 56 percent of survey respondents said if a recession did it, they’d halt their home search until the economy improved.
That said, the upcoming recession isn’t expected to be as devastating as the Great Recession seen a decade ago.
“Economic activity is cyclical, so yes, undoubtedly we will face another recession at some point in the future, but we do not expect it to be anything like 2008,” said George Ratiu, senior economist at Realtor.com. “The next recession will likely be driven by factors outside of housing, such as a prolonged trade war, cutbacks in corporate spending or contagion from a European recession. Unlike 2008, mortgage underwriting has been more disciplined and regulated, which should provide a more secure foundation for housing during the economic ups and downs.”
More than 36 percent of the 755 active buyers surveyed by Toluna Research expect the next recession to begin sometime in 2020 (up six percent from March).
Meanwhile, according to the Realtor.com survey, 32 percent of active buyers indicated they are a lot more optimistic toward homeownership following 2008, whereas only 7 percent of non-buyers felt this way.
Additionally, 17 percent of current shoppers expect a recession to hit sometime in 2019, 14 percent expect sometime in 2021, and 7 percent expect sometime in 2022. Eight percent expect sometime in 2024 or later and 17 percent reported they didn’t know.
In response to the survey, residential brokers had mixed views on how recession fears could impact the market.
Gary Malin, president of Citi Habitats, said ultimately it depends on buyers’ individual situations.
“Not all recessions are created equal,” he said. “In the event a recession occurs, obviously it means the economy is on shaky ground. When it happens, people start looking at their personal circumstances. They look at their stocks, they look at their jobs, they look at their wages and make decisions based on those factors.
“Some people will take a conservative approach. They wait to see how their jobs react, how the market reacts. Other people might be sitting on the sidelines and believe there’s an opportunity in the marketplace. Not every sector gets hurt by a recession. You’ve got to understand what someone’s job is. People who purchased during the last downturn have done very well with their investment.”
Malin added that even without a recession, the market has already been dealing with its own downturn.
“It’s not like people are going to wake up all of a sudden,” he said. “The sales market has felt a lot of this pain to begin with. Great homes still sell. Generic properties are having difficulty and the high-end places are seeing price reductions.
“I can tell you what I hear from the marketplace; it has been having its struggles. The stock market has been going up at a rapid pace. There’s bound to be a correction.”
Other brokers said recession worries will ultimately work in the favor of those who refuse to get spooked by all the doomsday reports.
“The New York market started softening in 2016 so we are three years into the real estate market correction,” said Michael J. Franco of Compass.
“Historically in New York prices don’t drop drastically so I believe it is a good time to buy especially if more wait by the sidelines because of recession jitters. Historically recessions don’t last forever so if you can afford your monthly payment after buying you should fare well post-recession.”
Franco said he expects a recession will happen in 2020.
“Fifty percent of economists think we are due for a recession next year. Therefore, I think it is a safe bet to assume it could happen or the year after. Seems to me the more everyone reads and hears about it the more likely it is to happen. Self-fulfilling prophecy!”
Agent Steven A. Gottlieb of Warburg Realty said a recession could very well happen if the trade war with countries like China continues and those other countries hit back with tariffs and other costs that leave Americans feeling drained and willing to spend less.
“As the 2020 elections approach, the current administration will do what it can to stave off recession, as that will prove a real hurdle for reelection,” Gottlieb said.
The agent added he believes those interested in buying would be wise to do so before the election, if their intention is to keep the property long-term.
“Now is a great time to buy if the buyer will own the property for a while. Prices (at least in our local market) have been softening for years, but I think that buyers have settled into the political and economic uncertainty that we’ve been experiencing lately, and thus are coming out of the woodwork.
“I don’t think it’s a good time to ‘flip’ since we are not in a surging market, like in 2013 and 2014, but it’s a good time to get in. Sellers are becoming more realistic and there are deals to be had.”
Meanwhile, at least one broker, Gill Chowdhury of Warburg, doesn’t believe there’s a recession ahead any time soon.
“Although the media has been reporting on an upcoming recession, that is simply not the reality,” he said. “The current trade war with China has caused some turbulence in the stock market. What’s important to note is that anyone using the total number of points to describe how the market is doing is simply not sophisticated and/or is fear-mongering. In addition to this we see American wage growth going strong with inflation slowing down.
“Unemployment remains at historic lows. Personally, I don’t expect us to see a recession until well after 2020 which is exactly what I tell buyers who bring it up.”