Buyers Waiting for Home Price Declines? It Won’t Be Soon
Recession notwithstanding, housing prices rarely go down – and the financial underpinnings that led to steep drops a decade ago aren’t present in today’s market.
NEW YORK – A recent report by title insurance company First American Financial Services contends that the next recession, when it comes, won’t likely prompt a major downturn in the housing market. The report used internal data as well as information from Freddie Mac and the National Association of Realtors®.
Report author Odeta Kushi, deputy chief economist at First American, asserts that home price appreciation continued at an even pace during most economic downturns, and existing-home sales growth only edged downward slightly. During the Great Recession, though, average U.S. house prices fell approximately 33% because homeowners were over-leveraged.
The growth in home prices during the current economic expansion hasn’t been fueled by increased access to mortgage credit. Rather, it reflects basic supply and demand, where many Americans want to become homeowners, but the supply of homes available for sale is very low.
Still, homeowners need to be cautious because some Americans have taken cash-out refinance mortgages as home values have grown, reducing the equity they have in their properties. Research has shown that foreclosures exacerbate economic downturns – and they can have a ripple effect through a local market.
At the local level, certain housing markets could prove more resilient in the event of recession, depending on the strength of the local economy relative to what is going on at a national level.
Source: MarketWatch (02/09/20) Passy, Jacob
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