There’s been talk that the U.S. housing market is headed for a recession, but new data is showing there might be very little to fear.
A recent article on Florida Realtors’ website revealed that since 1997, excluding the Great Recession, homes values have appreciated at nearly the same rate during recessions and economic expansions.
Of the 1,039 instances of state-level recessions, the average appreciation was 4 percent compared to the 4.6 percent during times of economic growth.
“The housing crash during the Great Recession left a lasting impression on our collective memory,” said Jeff Tucker, an economist for Zillow. “But as we look ahead to the next recession, it’s important to recognize how unusual the conditions were that caused the last one, and what’s different about the housing market today.”
Tucker said there are plenty of factors that made the Great Recession an outlier and not the norm going into the next economic downturn.
“Rather than abundant homes, we have a shortage of new home supply. Rather than risky borrowers taking on adjustable-rate mortgages, we have buyers with sterling credit scores taking out predictable 30-year fixed-rate mortgages,” Tucker said. “The housing market is simply much less risky than it was 15 years ago, and our experience in recent localized recessions shows how home prices can weather normal economic headwinds.”
The potential recession hasn’t stopped homebuilder stocks from reaching new highs.
The SPDR S&P Homebuilders ETF is up 29 percent this year, which is 12 points higher than the S&P 500’s gain. Right here in our own backyard, Miami-based homebuilder Lennar is up 32 percent.
The Wall Street Journal article credits the Federal Reserve’s decision to lower interest rates in addition to falling mortgage rates, which have dropped to their lowest levels since 2016, for the rise in homebuilder stocks.
South Florida home sales have also risen based on July numbers released by the Miami Association of Realtors.
Residential sales up 6.9 percent (2,490)
Single-family home sales up 15 percent (1,270)
Single-family homes dollar volume up 31.5 percent ($805.3 million)
Median price of single-family homes up 0.7 percent ($372,000)
Condo sales down 0.4 percent (1,220)
Condo dollar volume up 2 percent ($466.9 million)
Median price of condos up 2.7 percent ($249,500)
Residential sales up 9.7 percent (3,181)
Single-family home sales up 12 percent (1,634)
Single-family homes dollar volume up 20.3 percent ($775.8 million)
Median price of single-family homes up 5.6 percent ($380,000)
Condo sales up 7.4 percent (1,547)
Condo dollar volume up 13.8 percent ($344.1 million)
Median price of condos up 4.5 percent ($172,500)
Palm Beach County
Residential sales up 11 percent (3,007)
Single-family home sales up 15.7 percent (1,775)
Single-family homes dollar volume up 29 percent ($1 billion)
Median price of single-family homes up 1.4 percent ($355,000)
Condo sales up 4.4 percent (1,232)
Condo dollar volume up 21.3 percent ($361.2 million)
Median price of condos up 4.5 percent ($185,000)
Mike has more than 30 years of experience in marketing and public relations. He once owned his own agency and has worked with some of the largest brands in the world.