Is the pace of existing home sales expected to decline slightly by the end of 2018, despite population and economic growth, lower unemployment, and modest wage gains? Is the Declining affordability the issue? Take a look....
Is a recession looming? It’s an important question because the U.S. economy has been experiencing one of the longest expansions ever. There were two recessions in the 1080s, one in the 1990s, and two in the 2000s. Since 2010, there have been none.
Every recession has a trigger. In the 1970s, it was energy price shocks. Could that happen today? Probably not, because the U.S. is now the worlds biggest oil producer. One potential trigger could be an unsustainable rise in borrowing. But the fact is consumer debt has only risen about 5 percent annually for the last few years. Although that’s fast, it’s not catastrophic. Past recessions were preceded by debt increases by 10 percent or more.
Another trigger could just be psychological. Pessimism leads to consumers to spend less. That leads businesses to scale back, reduce investments and not build that additional factory or office. But consumer confidence this year is at an index level of 127, the highest reading in more than 20 years(with 100 considered neutral).
Although it’s not clear what could trigger the next recession, it’s a good bet it won’t have anything to do with our industry. The housing market still has room to grow. A total of 6.1 million existing homes plus newly constructed homes will be sold this year. That’s the same level as in 2000, when the market was considered well balanced.
Home builders are at last responding to pent-up demand by increasing housing starts and creating jobs. For these reasons, the odds of a recession in 2019 are slight. And if we do see a drop in GDP, it will likely be mild-nowhere near the intensity of the recession a decade ago.