Your Real Estate Update
From Pat Chadwell, broker, CRS, ePro, SRES, PSA
Pat Chadwell, broker, CRS, ePro, SRES, PSA, Realty World - Residential Specialists / DRE #: 01078181
900 E. Hamilton Ave #100, Campbell, CA 95008
(w) 408.927.6565 (c) 408.394.9999
Home Buyers See Recession as Likely, but It's Not Stopping Them
By: Peter Suciu

While the U.S. economy has been chugging upward for the last seven years, the good times could be coming to an end. But that isn't deterring determined home shoppers from trying to close on a home.

Whether it's sooner or later, most home buyers, according to a recent realtor.com® survey, believe a recession is on the way (much like winter on "Game of Thrones"). About 70% of home shoppers believe the United States will enter a recession within the next three years.

More than 1,000 active home buyers participated in the survey.

"There may be concern among some consumers, but economists and analysts generally expect that the next recession will be more mild than the [Great Recession], particularly in the housing market," says Danielle Hale, realtor.com's chief economist.

However, these gray clouds on the horizon could have a silver lining. If a downturn hits, about 41% of shoppers expect the housing market will fare better than it did in the Great Recession of a decade ago. Another 36% of respondents believe it's going to be worse, while 23% think it'll be just as bad.

Yet other life factors are simply closer to home.

Another recession isn't going to stop information technology specialist Richard Fame, 51, of Eastpointe, MI, from selling his home to buy a new one.

"It is inevitable," Fame adds, of his family's facing the possibility of an economic downturn. "If I make money on my current house, that's great, but I know I'm going to need to move."

In his family's case, moving to a better school district outweighs fears of a housing crash.

"Our next house will be for the long term," explains Fame.

Low mortgage interest rates could help to buoy the housing market as well. Rates fell to just 4.06% this week on 30-year fixed-rate loans, according to Freddie Mac. This could spur more buyers to close before rates go back up again.

The housing slowdown, which began over the summer as prices in many markets reached unheard-of highs and more sellers rushed to list their homes to cash in, could also lure buyers to seal the deal. It's resulted in more inventory and given home shoppers more options. And while home prices aren't coming down in most of the country, they are seeing a slower rate of appreciation.

Why a recession could be heading our way

There are a number of factors that suggest a downturn could be looming—but that doesn't mean folks should panic just yet. Despite high home prices, it doesn't appear that there's a housing bubble about to burst due to bad mortgages and an over-inflated market. Instead, a U.S. trade war with China could spur one; or a disastrous Brexit. Or it could just be that after some really good years, the good times eventually have to end.

"Workers are scarce, with the unemployment rate near record lows, and that's pushing up wages," says Hale. "Employers have to pay to attract workers, which could eventually translate into higher prices and cause consumption to slow."

That can cause inflation, a problem that can snowball if it increases at a higher pace than wages. The U.S. Federal Reserve typically tries to keep inflation in check by raising interest rates. This, in turn, makes it costlier for companies to borrow money to open up new operations, invest in new equipment, or hire new employees. And that can slow down the economy.

"I don't think the next recession will be as severe for the housing market as the last one," says Hale. "This one isn't likely to be as bad."



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