Tuesday, September 3, 2019 / by Andy Mandel
It’s been a crazy few weeks in the stock market, and there are some very scary headlines out there regarding a possible recession. They can be a little overwhelming, so let me cut through them to let you know the truth about what’s going on and how it will affect the real estate market.
We are currently in the longest period of economic growth in U.S. history. This period of growth will end when we have two consecutive quarters of declining GDP. That is the actual definition of a recession.
Let me be clear: A recession does not equal a housing crisis. They aren’t the same thing. The last recession did have a huge impact on housing prices, but it was caused by a meltdown in the housing and mortgage markets.
The days of anybody with a pulse being able to get multiple mortgages are over. Ask anyone who’s bought a house since 2009, and they’ll tell you that it’s much harder to buy a home now than it was back then. Mortgage lenders are checking multiple years of tax returns and debt-to-income ratios to make sure buyers have a history of financial stability.
In three of the last five U.S. economic recessions, home prices actually increased. Any indicators linked to an upcoming recession are not housing-related. The most likely culprits for the next recession are trade wars and the bumpy geopolitical climate.
Don’t let these scary headlines and thoughts of a recession lead you to believe that we’re heading for a housing crisis. Now is an unprecedented time with buyers having more inventory on the market than they’ve had in the last five years or so and with interest rates remaining at historic lows between 3.5% and 4%. Ask anyone who bought a house in the 1980s what their interest rate was. I’m positive it was much, much higher.
Even if a recession is coming in the next few years, it in no way means we are heading for a mortgage or housing collapse. If the recent volatility in the stock market has you concerned, I recommend investing in the safest market out there: the real estate market.
If you have any questions for me in the meantime, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.