The housing market in the U.S. could enter a recession in under five years, with online real estate company, Zillow predicting that it will happen in 2020.
In a report in which Zillow polled 100 real estate experts and economists about their predictions for the housing market, it disclosed that nearly half of all survey respondents said the next recession will commence in 2020, with the first quarter of the year cited the most as to when the recession will start. The main culprit for the housing recession: monetary policy.
Zillow is a popular website for aggregating real estate price information and gauging market sentiment for homebuyers and sellers. In this research report, several Zillow experts weighed in on the results.
“As we close in on the longest economic expansion this country has ever seen, meaningfully higher interest rates should eventually slow the frenetic pace of home value appreciation that we have seen over the past few years, a welcome respite for would-be buyers,” said Zillow senior economist Aaron Terrazas in the research report. “Housing affordability is a critical issue in nearly every market across the country, and while much remains unknown about the precise path of the U.S. economy in the years ahead, another housing market crisis is unlikely to be a central protagonist in the next nationwide downturn.”
If the survey respondents’ predictions prove true, the current economic expansion will be the longest ever recorded. While a housing collapse ushered in the Great Recession of 2008 and 2009, most survey respondents don’t think a downturn in the economy will be centered on the housing market this time around.
They think the Federal Reserve’s actions when it comes to interest rates will be the biggest reason for the looming recession. After all, if rates go up, it will be more costly to take out a mortgage, shutting some buyers out of the purchasing process. They noted that, if the Fed raises rates too quickly, it could slow down the economy and thus lead to a recession.
Courtesy: Donna Fuscaldo