Nearly 70 percent of home shoppers this spring think the U.S. will enter a recession in the next three years, but that hasn’t stopped them from trying to close on a home, according to new survey data released today from realtor.com. Despite the fact that they foresee an economic downturn, they generally expressed confidence that a future recession will be better than 2008 for the housing market.
Overall, nearly 30 percent of the 1,015 consumers who are active home shoppers surveyed expect the next recession to begin sometime in 2020. Twelve percent expect the recession to begin sometime in 2019, 16 percent expect sometime in 2021, and 12 percent expect 2022. Nearly 10 percent expect a recession in 2024 or later, and 21 percent reported that they didn’t know. The online survey was conducted earlier this month with Toluna Research.
Reflecting the belief that a recession is in the not too distant future or perhaps wishful thinking, a correlation can be drawn to the fact that shoppers feel that home prices have topped out, Hale noted. According to the survey, even though 63 percent of shoppers report that home prices are increasing compared to last year, 56 percent of shoppers believe home prices have hit their peak.
“The U.S. economy has been on a hot streak for the last seven years, producing steady economic growth and low unemployment rates. Historically, this type of growth hasn’t continued indefinitely, and U.S. home shoppers think it will come to an end sooner rather than later,” said Danielle Hale, realtor.com ‘s chief economist.
When asked if the U.S. housing market would fare better or worse than the 2008 economic recession, 41 percent responded with better. Thirty six percent expect it would be worse, while 23 percent expect it to be the same. Hale noted, the fact that some home shoppers expect the next recession to be harder on the housing market than the last recession suggests that they are buying homes with eyes wide-open and very sober, if not slightly pessimistic, views of the housing market. This is a stark contrast to the years leading up to the last recession when ‘irrational exuberance’ was more common and yet another reason to expect that the next downturn will be very different for the housing market than the last.
“When the U.S. enters its next recession, it is unlikely that the housing market will see a sharp nationwide downturn. The same record low inventory levels that have made buying a home so difficult recently, will likely protect home prices in the next recession,” Hale added.
According to the survey, 45 percent of home shoppers feel at least slightly more optimistic about homeownership after the 2008 recession. Less than a quarter – 22 percent – feel at least slightly more pessimistic about homeownership, while 33 percent reported no impact on their feelings about homeownership.
The duration of the recovery from the last recession could explain the optimism reported by some buyers. Since 2010, home prices across the U.S. have grown by 49 percent, the U.S. economy has grown by $3 trillion and 18.7 million more jobs have been created. This persistent optimism toward homeownership is likely a key reason that home shoppers are confident and looking to buy, even as they expect a recession is approaching.