Guiding Your Clients Through a Recession
The real estate market is constantly changing – year to year, week to week, even day to day. Throw in a global pandemic, the impact of which we are still grappling with, and it’s safe to say that it’s a confusing time in the market.
Is the U.S. headed toward an inevitable recession? Forecasts range widely, but unstable economic activity like high inflation, rising interest rates and an unpredictable stock market have many economists predicting that the chances for a recession are high (50% or above).
Other experts believe that chances are low or are confident that any impending recession will be “brief and mild.” Part of the reason for this uncertainty spectrum is that there’s no universal definition of a recession. One widely accepted definition of a recession is two consecutive quarters of economic shrinking. By that standard, we’re already in one.
Frustratingly, none of us have a crystal ball, and it’s impossible to say what the real estate market will do in the next day, week or year. Still, history shows that recessions significantly impact the real estate and housing market. Supply will likely outpace demand as fewer people have the means to purchase a home, which means longer periods on the market and falling home values.
The good news is that the real estate market has weathered recessions before and it’s certainly going to weather them again. Many buyers, sellers and homeowners make it through an economic downturn with no problems, and many have been able to make smart investments that have seen great returns in the years to follow.