Would a 2020 Recession Impact Home Prices?
Is a Recession Looming in 2020? How Will it Impact Property Values?
The 2008 recession left the nation crippled with economic disparity. Economic experts, like Robert Shiller, predict that there’s a 50/50 chance of a recession in the coming months. According to a Wall Street Journal poll, 25% of economists agree with Shiller, while more than 50% of all economists polled think such a recession, if it were to happen, will happen in 2020. So, where does this leave home buyers and home sellers across America? Potential home buyers want to know how it’ll affect home prices. For home sellers, however, they may want to re-examine the prospect of selling their properties in the event of another recession if they want to earn top-dollar for their homes. That is to say, a 2020 economic decline will likely bring about a real-estate buyer’s market, at least for homebuyers who can afford it.
The Instability of Banking on Economic Decline
When the economy slows down, fewer homebuyers may look to buy a house because they rather continue renting or stay in their living situation until the economy improves. But what about those who are interested in buying, regardless of an economic decline? They hope to see home prices dropping in the coming months. But claiming that property values will drop amidst a 2020 recession without reexamining past recessions and their effects on home prices is putting the cart before the horse. Though homebuyers enjoyed the largest price drop in history during 2008’s recession, during two, past recessions, home prices did the opposite and increased, as they did after the dot-com bust.
How Economic Decline Might Help The Already Financially Stable
The impacts of a recession are not entirely good or bad for everyone. Recessions impact different generations differently. Millennials, for example, struggle to establish upward economic mobility in the aftermath of the previous recession. Also, they battle historically high student debt. Therefore, a 2020 recession could have disastrous impacts on those who fall under that label. But if you’re in a financial position where you have a steady savings, financial assistance from family members, or a career that’s likely to outlast a recession, buying a home during a recession might make sense.
Those with money saved for a down payment should fare better in a recession. Most prospective home buyers struggle with the down payment. So, alleviating that burden places some people ahead of others, like millennials. Also, during a recession, sometimes unemployment grows. Unemployment could force other would-be homebuyers to either take money out of their savings or remove themselves from the market entirely. With less competition comes fewer bidding. Fewer bidding gives those able to place a bid on a home during an economic decline a slight advantage.
How A Recession Might Impact Homeowners in The West
Homebuyers, surprisingly, may have more leverage to buy a home in the West Coast in the near future. But not entirely because of a looming 2020 recession. On the West Coast, the high cost of homes has been a point of contention for a long time. Therefore, some experts agree that a housing crisis in the West means there could be a correction soon.
Homes in the Bay Area, though more expensive than properties in other areas, have already dropped in price a bit. If a 2020 recession hits, it could create attractive buying options in a California market primed to lower its cost. But again, those already at an economic disadvantage won’t be able to benefit from any slight dip in home prices. And those with student loans or other existing debt won’t be able to engage in bidding wars.
According to the Housing and Mortgage Market Review report from Arch Mortgage Insurance, the housing declines of the Great Recession aren’t typical—even in a recession, so expecting an impact as big as last time isn’t reasonable. “What we found is that the next recession is likely to be far less severe on the housing market than the last one,” Archi MI’s economists wrote in the report. “It’s not that this time is different; it’s that last time was really different from historic norms.”
Therefore, home price declines, if any, will be small in scale.
We Buy Houses in Bakersfield
Authentic HomeBuyer is a real estate solutions company based out of Bakersfield, CA. As a Bakersfield investor and family-owned business, we focus on helping homeowners find solutions to their problems, even in the face of a looming recession. If you’re looking to sell or have questions, fill out your FREE cash offer and see how much your home is worth or call us at (661) 505-9005!