And it's reasonable to expect steeper prices due to low-rate environment, says Redfin
Amid growing coronavirus fears, almost one-third of homebuyers and sellers are concerned that home prices will rise when the next recession hits.
In a new survey from Redfin, 32% of the respondents anticipated home prices to increase, down from 56% in December. Meanwhile, 25% of those surveyed in December expected prices to decline during the next recession. That figure jumped to 44% this month.
Redfin Chief Economist Daryl Fairweather said that home prices plunged in nearly every part of the US during the 2007-2009 Great Recession.
"It's easy to become fearful when it feels like a recession is imminent, but it's important to remember what has actually happened in past recessions," Fairweather said. "Home prices declined substantially during the Great Recession, which started with a housing crash, but throughout the 2001 recession home prices actually rose due to a nascent housing bubble and a shift in investment dollars from the stock market into real estate. It's perfectly reasonable to expect that a 2020 recession won't stop home prices from rising, since the supply of homes for sale is so constricted, and mortgage rates are at all-time lows."
The most noticeable change in home-price expectations came among the respondents under age 45. Before the current economic slowdown, 62% of them thought home prices would climb, and only 21% believed prices would drop.
As of March, the share of the younger demographic that expects prices to increase was cut in half to 31%, while the share that anticipates it to decline more than doubled to 47%.
"Even though it's likely that home prices may be insulated during the next recession, it's a good idea for every homeowner to have an emergency fund in place just in case their home loses value and their income declines simultaneously," Fairweather said. "Young homeowners who don't yet have much in the way of savings or equity should especially be thinking through worst-case scenarios."
