Photo: Robert Clark
The next recession could start in the US in just over three years, according to the results of new survey sponsored by Zillow and conducted by Pulsenomics LLC.
However, the survey’s panel of real estate experts predicts that housing will play a much smaller role this time around.
The panel says there’s a 73 percent chance a new recession will start “by the end of 2020” and will be triggered by a geopolitical crisis rather than housing. A potential geopolitical crisis could involve climate, topography and natural resources.
“Historically, geopolitical events rarely cause a sustained recession, and other contributing factors, such as oil price shocks, play a more predominant role,” says Zillow Chief Economist Dr. Svenja Gudell in a digital release.
SEE ALSO: Why more Americans were uncertain about the housing market in July
And while no specific geopolitical trigger was mentioned for the predicted forthcoming recession, world events played a part in a recession not that long ago.
“The last U.S. recession where geopolitical events played a primary role was the early 1980s recession with the Iranian Revolution and subsequent spike in oil prices pushed the US economy into negative growth,” Gudell tells BuzzBuzzNews.
Yet despite an expected impact on the housing market, respondents still predicted that home values would continue to grow at “a healthy pace.” Currently, home prices are expected to rise 5.1 percent in 2017, up from just over 4 percent earlier this year.
Another recession could help some homebuyers, but it would likely further slow the already lagging rate of wage growth.
“Wage growth has been lagging behind housing costs for a number of years and a recession would likely make that worse. While home values and interest rates would likely drop somewhat helping some homebuyers, those benefits would more than be offset by the detrimental effects of a weak labor market and rising negative equity,” Gudell tells BuzzBuzzNews.
The Great Recession of a decade ago was in part triggered by unsustainable home price increases coupled with lax lending practices. It led to a national economic recession, job loss and slow wage growth. Home values declined 23 percent on average, and more than 50 percent in some of the harder hit metros, says Zillow.
While some housing markets have since recovered, home values are still below pre-recession peaks in 55 percent of markets. Some 5 million homeowners are still “underwater,” or the fair market value of a home is less than the amount owed on a mortgage loan. Wage growth has only begun to accelerate after several years of flatlining.
“Incomes growing faster than home values is a promising sign for renters hoping to become homeowners, but they should still tread carefully in markets that have seen sharp price increases in recent years,” says Pulsenomics Founder Terry Loebs in a digital release.
The Zillow Home Expectations Survey is conducted quarterly and polls over 100 real estate and economic experts.
The latest edition of the poll was focused on the next recession, its causes and any potential effects on the housing market.
Click here to read the entire report.
