What is a recession? Will there be a recession in 2020? What does a recession mean for real estate?
#RealEstate #RealEstateMarket #HousingMarket
Subscribe for More Real Estate Tips and Real Estate Information – https://goo.gl/NZB1S6
Recession Definition – A recession is a contraction in the business cycle when there is a decline in economic activity and spending.
Lately there has been a lot of talk about recessions and what happens to the real estate market during a recessionary period. Let’s start by saying that Recessions by nature are healthy for markets as they are not only needed but necessary for continued growth.
With that said, let’s take a step back at the moment and look at where we are currently with regards to our economic fundamentals. We are currently sitting at a 3.7% unemployment rate which is very low and more or less means that every person who wants a job, has one. In addition, the current US GDP growth rate sits at 2.1% which is showing that the economy is still growing and within the ideal growth rate of between 2-3%.
The reason I bring this up is because currently the economy is still doing pretty well. In additon, the FED (Federal Reserve) has recently lowered the fed funds rate which has helped the real estate world by helping stimulate buyer demand. This along with the fact that inventory on a nationwide basis is still very low and with a lack of building new construction (primarily because of building restrictions) means that in the short term, a recession isn’t very likely in my opinion. We also have a President who won’t likely let a recession happen on this watch meaning he will do what is necessary to stimulate the economy during the rest of his term
While I don’t see a recession coming in the short term, I wouldn’t be surprised to start seeing the signs of one towards the end of 2020 but more likely in 2021. We have been in an economic growth phase for the last 10+ years so a recession isn’t only necessary in a way it’s needed.
Remember, that a recession doesn’t mean that home prices aren’t going to drop by 50%. It’s more likely to see housing go sideways to down 5-10% during this time rather than some huge drop. A Recessions just means a contraction in the business cycle which usually means companies spending less money and laying off employees, unemployment rises, stock market goes down and the national debt continues to rise (which is happening anyway). A recession is not a catastrophic event like a depression. On average, a recession last around 22 months.
During a recession is the best time to not only buy property but also stocks. Remember, buying property is a long term play so make sure that you have some cash on hand so when the market does pull back you are sitting in a position to buy.
If you have additional questions about Recessions and Real Estate, please comment below or contact me directly.
Thank you for taking the time to watch. Have a great day!
Connect with me: