Homebuyers are getting ready for a recession but when?

by Steve Randall29 Aug 2019

Almost half of US homebuyers said they expect a recession either later this year (17%) or in 2020 (36%) according to realtor.com.

Its survey, conducted among 755 of those currently searching for a home by Toluna Research this month, shows that the share that believe a recession will start in 2020 has increased 3 percentage points since a similar survey in March.

Those who expect a recession in later years include 14% forecasting 2021, 7% in 2022, and 8% in 2024 or later. 17% didn’t know.

More than half of respondents (56%) are prepared to put their home search on pause until the economy recovers, although they expect the downturn to be milder than the Great Recession.

"Economic activity is cyclical, so yes, undoubtedly we will face another recession at some point in the future, but we do not expect it to be anything like 2008," said George Ratiu, senior economist at realtor.com. "The next recession will likely be driven by factors outside of housing, such as a prolonged trade war, cutbacks in corporate spending or contagion from a European recession.”

Ratiu noted that unlike 2008, mortgage underwriting has been more disciplined and regulated “which should provide a more secure foundation for housing during the economic ups and downs."

Non-buyers more negative

Asked about the previous recession, active homebuyers are more optimistic than those that are not currently in the market to buy.

Almost a third of active buyers indicated they are a lot more optimistic toward homeownership following 2008, whereas only 7% of non-buyers felt this way. Non-buyers are nearly twice as likely (11%) to feel very pessimistic or slightly more pessimistic toward homeownership following 2008, versus just 6% for active buyers.

"When warned about an incoming storm, Americans know to prepare by stocking up on necessities and reinforcing their shelter. Similarly, given the cyclical nature of economic activity, consumers can and should prepare for the next downturn now. Taking steps to shore up their financial well-being, strengthening their professional networks and having adequate savings would provide cushioning during the slowdown," Ratiu noted.

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