Is a Recession Here? Yes. Does that Mean a Real Estate Crash? No.

Is a Recession Here? Yes. Does that Mean a Real Estate Crash? No.

by Bobby Freeman, Realtor

Recently the National Bureau of Economic Research announced that the U.S. economy is officially in a recession. This did not come as a surprise to many, as the Bureau defines a recession this way:

“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”

Everyone realizes that the pandemic shut down the country earlier this year, causing a “significant decline in economic activity.”

Though not surprising, headlines announcing the country is in a recession will cause consumers to remember the devastating impact the last recession had on the housing market just over a decade ago.

The real estate market, however, is in a totally different position than it was then.

“Many of us remember the housing crash that lead to the recession in 2008-2009. The real estate market was much different back then compared to today” says Jennifer McCoy, Broker/Owner of McCoy-Freeman Real Estate serving all of Florida’s Space Coast.

“Even though the housing market led into the recession in 2008, this time it may help bring us out of it,” says McCoy.

Four major differences in today’s real estate market are:

Families have large sums of equity in their homes

We have a shortage of housing inventory, not an overabundance

Irresponsible lending no longer exists

Home price appreciation is not out of control

We must also realize that a recession does not mean a housing crash is will follow.  In three of the four previous recessions prior to 2008, home values increased. In the other one, home prices depreciated by only 1.9%.

Bottom Line

Yes, we are now officially in a recession. However, unlike 2008, this time the housing industry is in much better shape to weather the storm.

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