Predicting the Housing Market and Economic Health

 

The next recession is likely to be triggered by monetary and trade policy according to experts surveyed by Zillow, and that could happen as early as 2020. Through its 2018 Q2 Zillow Home Price Survey, the real estate engine asked more than 100 real estate experts and economists about their predictions for the as well as the triggers for the next recession and when it would begin.

A very few, only nine, of the over 100 experts surveyed believed that the next downturn would be triggered by the housing market. “By most measures, the is doing well; GDP is growing steadily and unemployment is near historic lows. This has prompted the Federal Reserve to raise short-term interest rates four times since the start of 2017,” Zillow said in its survey. With two more rate hikes expected this year, the experts surveyed believed that raising rates too quickly could push the economy towards slower growth, leading to a recession.

Despite these misgivings, the respondents also thought that the housing market would continue to experience strong appreciation, predicting that home values in the U.S. would rise 5.5 percent in 2018 to a median of $220,000. They had predicted home values to rise 3.7 percent in 2018 during the same period last year.

“As we close in on the longest economic expansion this country has ever seen, meaningfully higher interest rates should eventually slow the frenetic pace of home value appreciation that we have seen over the past few years, a welcome respite for would-be buyers,” said Aaron Terrazas, Senior Economist at Zillow. “Housing is a critical issue in nearly every market across the country, and while much remains unknown about the precise path of the U.S. economy in the years ahead, another housing market crisis is unlikely to be a central protagonist in the next nationwide downturn.”

On average, panelists said they expected home value growth to slow further in coming years – to 4.1 percent by the end of next year, 2.9 percent in 2020, 2.6 percent in 2021 and 2.8 percent by 2022.

On mortgage credit, most of the respondents had a positive assessment of residential lending with 51 percent saying that today’s mortgage underwriting standards were “just about right, neither too tight, nor too loose.” Around 25 percent of respondents felt that underwriting standards were somewhat tight, whereas 21 percent said that they were somewhat loose.