Realtor.com published a new survey earlier this week that said homebuyers expect a recession to strike by 2022.
Nearly 75% of active homebuyers surveyed by Toluna Research on behalf of Realtor.com said a recession is possible in the next three years — 36% said it could begin as early as next year.
“During the first half of the year the U.S. economy has done well, employment and wages are positive for buyers, but all the news about the trade war, Brexit and concerns over the European recession are beginning to hit home,” said George Ratiu, senior economist at Realtor.com, on Yahoo Finance’s The First Trade.
The survey said 56% of homebuyers would stop looking for a home when a recession hits, wait out the economic storm for cheaper deals after prices correct. Most of the respondents said a recession would be nothing like the 2008 meltdown (but seriously, how do they know?).
“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 in a press release. “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.”
Ratiu said the current economic environment has “darkened” for homebuyers.
“When warned about an incoming storm, Americans know to prepare by stocking up on necessities and reinforcing their shelter. Similarly, given the cyclical nature of economic activity, consumers can and should prepare for the next downturn now. Taking steps to shore up their financial well-being, strengthening their professional networks and having adequate savings would provide cushioning during the slowdown,” Ratiu noted in the release.
The recent 2-10 yield curve inversion has forced markets towards pricing in a higher recession probability in the next 12 months.
The “inflation downturn signal likely arrived in September 2018. But the rate cut cycle has only just begun – with a ten-month lag. As we noted many months ago, over the past 35 years such belated rate cuts have always been associated with a recession,” said Economic Cycle Research Institute(ECRI).
With a recession on the horizon, the housing market has been stalling for the 15th straight month.
S&P CoreLogic Case-Shiller’s 20-City Composite price index showed YoY growth at just 2.13% in June.
And when it comes to demand, not even an extreme drop in mortgage rates over the last 40 weeks can trigger new home buying.
The animal spirits of homebuyers are darkening, they’ve broken away from the “greatest economy ever” illusion and have seen reality of economic storm clouds gathering overhead, it’s just that these homebuyers might have the timing of the next downturn completely wrong: a recession isn’t likely to start in 2023, it’s more likely to begin next year.
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