For those of us in the real estate biz, the mere mention of the word “recession” conjures up nightmarish reminders of overgrown lawns and boarded-up windows, foreclosures and short sales. Unfortunately, many economists believe that a recession is on the way between now and 2021, with most targeting 2020. It seems like we’ve barely recovered…would a new recessionary period be as devastating?
On the positive side…
- Interest rates are likely to remain low and lower rates equal greater affordability, keeping more people in the market.
- Today’s real estate market is better protected from speculation and risky mortgages. Plus, owners have greater equity which helps insulate them against foreclosure. It things get tough they can likely sell versus losing their home.
- Housing demand remains high due to slow home building starts and the rise of millennials that are looking for single family homes to raise families.
- Somewhat lower prices could expand the buyer base.
- The world economy will likely be a driving force of a recession, including our escalating trade war with China. Higher import costs passed to consumers means less money available to spend on housing.
- According to some experts, prices could drop significantly, though not to the 50% level we saw in 2008. Sales could dip by as much as 10 – 20% in some markets.
- There will be lay-offs and fewer jobs. If a two-income family becomes a one-income family that has a substantial impact on their housing budget.
- Anticipation of a recession alone could persuade homeowners to wait to sell until they can get a higher price for their property.
What to do here in San Diego…
- Don’t panic. By all indicators, there is nothing that suggests that a coming recession will be anywhere near as devastating here in San Diego county as the last. That being said, I predict there will be a price softening which will impact our market.
- If you’re planning on selling, this is a good time. We are seeing some softening of prices, especially in the higher ranges above $800,000 and a slightly longer time on market, but overall homes are still selling well due to reduced inventory. Perhaps better to sell now then face lower prices a year from now.
- If you’re planning on buying a primary residence this is still a good time, but keep your eye on prices and interest rates. While we will likely see some prices drop we really don’t know what interest rates might look like a year from now. Also, current sellers might be more motivated, given the uncertainties.
- If you’re a cash buyer investor, I’d recommend waiting unless you can locate a motivated off-market seller. Prices are likely to fall a bit and you’ll be in a better bargaining position.
Please note, this information is strictly my interpretation of expert opinions about the current market. Please do your own homework and consult the appropriate professionals before making any buying or selling decisions.
Questions? Ready to buy or sell? Please don’t hesitate to give me a call!