Analysis from First American Financial Corporation says that while the U.S. economy is currently in the longest recorded economic expansion on record, a correction could be coming.
However, the housing market could stave off a downfall than fall victim to a recession.
“An economic expansion doesn’t just die of old age, something has to kill it. So far, that has not happened. Yet, while last summer’s concern about an imminent recession may have been a false alarm, recession isn’t indefinitely avoidable,” said Odeta Kushi, Deputy Chief Economist at First American.
Kushi said that while the Great Recession is still fresh on the minds of many consumers, the housing market has weathered other recessions since 1980. She said, with the exception of the Great Recession, as year-over-year existing-home sales growth barely declined in all other previous recession in the last 40 years.
“Unlike 2008, the housing market today is not driven by homeowners who are highly leveraged, as shown by the fact that the household debt-to-income ratio is at a four-decade low,” she said. “Additionally, the housing crisis in the Great Recession was fueled heavily by the fact that job loss was paired with a significant share of homeowners who didn’t have much equity in their homes.”
Kushi added that homeowners have high levels of tappable home equity in today’s market, providing a cushion to “withstand potential price declines.”
“Today, it’s reasonable to expect homeowners to stay where they are if the economy wavered and wait until they feel more financially confident to move, or tap into home equity for recurring expenses, or sell and pay off their mortgages if necessary,” Kushi said.
Additionally, Kushi said housing could aid the economy in recovering from the next recession.
Recent analysis shows that recovery from the Great Recession has been uneven across the nation.
Foreclosure rates have been wallowing at impressive lows for some time. ATTOM Data Solutions reported the national foreclosure rate last year was 0.36%.
However, some feel the housing market has never fully emerged from that housing crisis. One market expert says we’re just now seeing “some signs that America’s housing crisis might be starting to abate.”
Ben Wilterdink, Director of Programs at the Archbridge Institute, a think tank based in Washington, D.C., said in an article in The Hill, “The nation as a whole has largely recovered from the financial crisis. But the recovery has been deeply geographically uneven, with urban areas experiencing high levels of population growth and new business formation while rural areas remain much more economically stagnant.”