There’s been a lot of buzz in the news lately about an impending recession, and many economists say the odds of a recession happening in 2020 or 2021 are increasing. Just last week, in fact, the PMI index dropped below 50, which is a sign that the manufacturing sector is contracting.
However, this still doesn’t mean a recession is a foregone conclusion, and there are two primary reasons why. First of all, our unemployment rate is just 3.5%—the lowest it’s been in decades. Also, people are still spending money—a lot of houses and cars are still being sold. These circumstances alone mean we might be able to avoid a recession.
If a recession does hit, though, what will happen to your home’s value? Will there be a crash like back in 2008? It’s doubtful, because a recession doesn’t equate to a housing crisis. We all remember 2008, but there were four recessions before that in the not-too-distant past, and in three of those recessions (1980, 1981, and 2001), the average home price actually rose. In the one recession where the average dropped—1991—it only did so by 1.9%.
The 2008 crash was a housing-led recession caused by bad lending practices, but most of those practices have been cleaned up, so we probably won’t see a repeat of that.
The bottom line is, if you’re on the fence about buying a home because you’re fearful of a recession, I think you’re better off buying now. Prices probably won’t drop that much if a recession materializes. And if you’re thinking of selling, now’s a good time to do that as well due to low inventory and low interest rates.
If you have any more questions about this or any other real estate topic, don’t hesitate to reach out to me. I’d love to help you.