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Recession Worries and Risks for Homeowners

As the threat of recession closes in, realtor.com examines how an upcoming recession will impact housing. While many fear a repeat of 2008 as other countries including Germany and Britain approach a recession, and the U.S. trade war with China escalates, there may be less to worry about than previously thought.

"This is going to be a much shorter recession than the last one," predicts George Ratiu, Senior Economist with realtor.com. "I don't think the next recession will be a repeat of 2008. ... The housing market is in a better position."

Additionally, the majority of economists and analysts believe the recession still has at least a year before it arrives. Just 2% of economists, strategists, academics, and policymakers believe a recession will start this year, according to a recent survey of more than 200 members of the National Association for Business Economics. Meanwhile, 38% believe one will begin in 2020, while 25% anticipate one starting in 2021. Fourteen percent expect it won't materialize until after 2021.

In the event of a recession, how will the housing market react? According to realtor.com, it is unlikely that buyers will see a serious crash, like the Great Recession, as there are fewer homes being built and a higher demand, especially from first-time buyers. Additionally, the threat of recession may make the inventory shortage even worse, as would-be sellers may decide to postpone listing until they can get top dollar for their properties.

Another worry regarding a recession is a possible increase in foreclosures. However, like home prices, economists do not believe a recession will create mass foreclosure like the Great Recession did, due to tightened lending laws meaning only qualified borrowers can secure a mortgage.

"This time we won’t have bad mortgages, just people who are losing jobs," says Lawrence Yun, Chief Economist of the National Association of Realtors.

Additionally, more homeowners outright own their home than before the Recession. According to analysts, with so many outright homeowners and low foreclosures, any increase in foreclosures will be minimal.

"Foreclosures will definitely increase, but only because [the number of] foreclosures are [already] at rock bottom," says Andres Carbacho-Burgos, a Senior Economist at Moody’s Analytics focused on housing. He expects a recession will happen at the end of this year or early next year, and last only two or three quarters.

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.

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