Recession Obsession

Market News

Sep 20

Written By Maggie Visser

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Did You Know?

Warren Buffet made about 95% of his wealth since the age of.....60! The average person becomes a millionaire closer to the age of 60, and women hit this milestone sooner than men, under 59 years of age.
Re-financing volume are up over 160% from a year ago. (CNBC)
10,000 Americans turn 65 years old EVERY DAY...and this will continue to 2030. (Crain's)

Recession Obsession

Recession talk has become somewhat obsessive over the past few weeks and many have reached out to me for my opinion on this subject. Whilest I am not an expert, I thought I would share some facts about recessions since - and including - the Great Depression (a once-in-a century occurrence):

There have been 14 recessions total since and including the Great Depression of 1929, or one every 6.4 years. We have not had a recession in 10 years.
64% of recessions since 1929 lasted under 1 year.
Unemployment rose above 10% in only three recessions. In the past 50 years, unemployment averaged 8.25% during recession.
In the past 50 years the average GDP decline was just 2.2%. Currently the USA GDP is growing over 2% annually.
ATTOM Data Solutions looked at home prices during the five recessions since 1980 and found that only twice—in 1990 and 2008—did home prices come down during the recession, and in 1990 it was by less than a percent. During the other three, prices actually went up.

Buying a home during a recession

Many buyers think waiting till a recession hits will allow them to buy 'bargains'. This may be true for some all-cash buyers, although history has taught us that when a recession hits:

The best properties are often withdrawn from the market IF there are signs of price declines.
Interest rates may be lowered, but obtaining financing becomes tougher as banks usually tighten lending standards.
If you lose your job, its almost impossible to obtain a mortgage.
Cash buyers are always waiting for opportune moments to buy. Competing with these buyers is tough enough during good times. Its worse during tough times.
Rents tend to rise during recessions as fewer people qualify for a mortgage to be able to buy. Homeowners who have to foreclose also add new demand for rental housing.

Much of the housing demand is driven by employment. A spike in unemployment could negatively impact demand, particularly if an intensifying trade war leads to export tariffs, which could put jobs at risk. But with unemployment at 2.4% in San Francisco, it would take a pretty dramatic rise to cause home prices to drop.

In addition, tariffs on imports and tight immigration policy could push constructions costs even higher - all which could impact supply and ensure that housing prices will not slow down , if any at all.

Most importantly, we need to remind ourselves that even in the WORST recessions life goes on: people get married, divorced, die, give birth, etc and the vast majority continue working and earning.....and living.