It’s time to have a real discussion about all of the recession talk floating around. While it may be a legitimate discussion, we really need to get clear of what a recession is, and what it may mean for our customers. While I am not an economist, I have been in the mortgage industry since 1983 and have seen a few of them come and go.
First, the widely accepted definition of a recession is two consecutive quarters of negative GDP growth. So before we get everyone gets into a panic of a recession, don’t you think we might need to see at least one month of negative growth before we get all wound up about a recession?
Second, the effects of a recession in the housing market are generally positive. Home prices rise and interest rates remain steady or go lower.
Third, the last recession, the one everyone felt most impact on home prices going lower, was a direct result of the housing and financial markets gambling with home ownership. Everyone could get a loan, many did, a few had many! It seemed everywhere you went people were buying one or two investment properties with no money down with poor credit histories! Places like Florida, Nevada, and Arizona saw people buying multiple properties from other states trying to become successful absentee owners, and many others bought homes they could neverreally afford. Add to that, Wall Street was playing games with mortgage backed securities and you had it all came tumbling down! That is not the scenario now, not by a long shot.
Today we are seeing a world-wide recession where there are actually many places where you can find negative growth and negative interest rates! We are not there! While we did see the markets go crazy when the two year treasury and the ten year treasury invert, the two year was paying higher interest than the ten, we are still far from negative!
I also want you to remember that the same people now screaming about a possible recession were the same people who said that 30 year mortgage rates were going to be 4.8% to 5.7% by the end of 2019! They said this in January 2019. So, if all of these financial guru’s thought rates were going to almost 2% higher than they are right now, how are we supposed to react to their projections for something going to happen by 2021?
So please, inform yourself first! Go look and locate the very information I am talking about. Google search rate projections from January 2019 and see what you find. Look at the great information available through KCM (Keeping Current Matters) has on its own Facebook page that you can share with your clients!
We may actually see a recession in the years to come. It’s very likely to happen because it happens on a regular basis! The facts remain, while recessions are not a great thing, they generally help the housing market, not hurt it!
Quick note, NREP published a great piece on their site which I shared on my Facebook page on 8-20-19 regarding Zillow! You all know what I have talked about the last few years, it’s nice to see someone with a larger platform sharing the awareness