What does a possible recession mean for people thinking about buying a house?
ATLANTA - If you feel a little pinched financially, you’re not alone.
If you’ve bought a tank of gas or been to buy groceries lately, you have felt it. So what do you do if you're thinking about buying a house?
FOX 5 real estate expert John Adams says he believes that the United States is in a recession right now, but he's describing this as a recession with a small "R."
Adams defines recession as a period of declining economic performance across an entire economy that lasts for several months.
RENT COSTS SKYROCKET ACROSS GEORGIA WITH NO RELIEF IN SIGHT
He predicts that the current downturn will be relatively mild and that a recovery will likely be quick. By that he mean this will not be an economic disaster from which mankind may never recover.
It’s not going to be protracted, and things aren’t going to fall apart like they did in 2008.
According to Adams there are a few factors to consider showing we're in a better position than last recession.
- Many households are flush with cash from the pandemic. They got state unemployment, they got federal wage subsidies, they quit paying rent, and they didn’t spend much for 18 months.
- Most homeowners have lots of equity. Existing home prices are up 37% since the beginning of the pandemic in March 2020, and that’s a nice cushion that didn’t exist in 2008.
- No stated income loans - all are low cost and fixed rate. Literally millions of homeowners refinanced during the pandemic at super-low rates with very affordable fixed payments.
- Demand for new workers is strong. Employers can’t find workers because those workers have decided they don’t need to work anymore. When they quit looking for work, they are no longer classified as unemployed. There are plenty of jobs out there today.
- Banks are well-capitalized. In 2008, we saw predatory lending targeting low-income buyers, excessive risk-taking by financial institutions, and the United States housing bust culminated in a "perfect storm." Today, our financial institutions are in very good condition.
His prediction is that the recession will be not very bad and not very long. That’s why he calls it a recession with a small "R." Yes, we are beginning to slow things down, but let’s remember how fast we have been growing.
In the next year, the Fed will continue to raise interest rates, housing prices will slow down, the economy will take a deep breath, and in 2024, we’ll start a new cycle all over again.
This is the way our government works.
The bottom line is since WW2, we have had a repeated pattern of economic expansion followed by a shorter retraction. The average recession lasts only 11 months, while the average period of growth lasts over six years.
This, too, shall pass!