By Gregg Logan, Managing Director, and Sean Thompson, Associate
The risk of a recession in the near term is moderate, but many economists are still predicting a recession by 2021.
New home sales volume, and single-family and multifamily permits, all fell in the last six recessions. On average, new home sales declined by 9.6%, though the range across recessions is broad, from 3.5% to over 13% prior to 2008, and a whopping 66.2% in the Great Recession.
We believe the next recession will have moderate impacts on for-sale residential real estate, since the economy is strong, unemployment is low, and the signs of slowing that we have seen in the housing market on and off over the last year appear to be more a function of high prices than of low demand. The homebuilding industry appears to be making adjustments, albeit late in the cycle, to address the demand for smaller and more attainably priced housing, and the median new home price has come down recently. Rising mortgage interest rates could slow down the market, as we saw in 2018. However, rates dropped again in March, and though increasing at a moderate pace, remain at historically low levels.
With the expectation that a recession is still on the horizon, and will likely have modest impacts on for-sale residential real estate, how should real estate operators and investors prepare? See the full article for a more in-depth discussion of these and other issues.
