Home shoppers Optimistic but do they expect a recession?

SANTA CLARA, Calif. – April 3, 2019 – 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 by realtor.com. Even though they expect another recession, they don’t believe it will be as bad as the 2008 one.

Overall, nearly 30 percent of 1,015 active home shoppers surveyed expect the next recession to begin sometime in 2020; 12 percent expect sometime in 2019; 16 percent expect sometime in 2021; and 12 percent expect 2022.

Nearly 10 percent don’t expect a recession until 2024 or later, and another 21 percent said they didn’t know. The online survey was conducted earlier this month with Toluna Research.

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 feeling that home prices have topped out could be a reflection of shopper beliefs that a recession is in the not too distant future. In fact, those expecting the recession sooner were more likely to report that home prices had peaked, says Danielle Hale, realtor.com‘s chief economist.

“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,” says Hale.

When asked if the U.S. housing market would fare better or worse than the 2008 economic recession, 41 percent responded with better; 36 expect it would be worse; 23 percent expect it to be the same.

The fact that some home shoppers expect the next recession to be harder on housing than the last recession suggests that they are buying homes with eyes wide-open and very sober, Hale says. This buyer outlook stands in stark contrast to the years leading up to the last recession when “irrational exuberance” about the market’s future was more common. It’s also another reason to expect the next downturn to be very different for housing than the last one.

“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 adds.

According to the survey, 45 percent of home shoppers feel at least slightly more optimistic about homeownership after the 2008 recession. Less than one in four – 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 to be approaching.