{"id":2170,"date":"2022-04-22T10:00:00","date_gmt":"2022-04-22T14:00:00","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=2170"},"modified":"2024-04-25T23:18:45","modified_gmt":"2024-04-26T03:18:45","slug":"now-theyre-talking-about-a-recession","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/now-theyre-talking-about-a-recession\/","title":{"rendered":"Now They\u2019re Talking About a Recession"},"content":{"rendered":"\n
\"How<\/figure><\/div>\n\n\n\n

What Home Sellers and Buyers Should Know<\/em><\/strong><\/p>\n\n\n\n

If you\u2019re getting whiplash from the headlines about the economy, no wonder. Why are we now hearing about a looming recession?<\/p>\n\n\n\n

First, the keyword is looming \u2014 not immediate. This is not expected to happen for another year and a half or so. Second, it\u2019s not expected to be severe.<\/p>\n\n\n\n

Here\u2019s more on what we know so far.<\/p>\n\n\n\n\n\n\n\n

Weren\u2019t We Just Hearing About a \u201cHealthy Economy\u201d?<\/h2>\n\n\n\n

With help wanted<\/em> signs everywhere and wages on the rise, financial opportunity has seemed fairly accessible. Headlines heralding a \u201cstrong economy\u201d have been all over the news. And now we\u2019re hearing about a recession. What gives?<\/p>\n\n\n\n

No matter how strong the economy seems to analysts, ordinary people know their dollars have been rapidly losing buying power for the last two years. This year, analysts had to say it: inflation has reached its highest rate in forty years.<\/p>\n\n\n\n

When inflation rises, the federal government starts \u201ctightening\u201d \u2014 ratcheting up interest rates to keep prices in check. History shows how hard this is to do without sending the economy into a recession. And although the decision makers at the Federal Reserve think they can gently lower inflation without hurting the jobs market, many economists worry that they can\u2019t. After all, the Fed didn\u2019t think inflation would rise as sharply as it\u2019s rising now.<\/p>\n\n\n\n

Granted, federal decision makers are dealing with many question marks. Material shortages are rampant, and now Chinese factories in key cities have suspended operations for public health reasons. It\u2019s hard to say how things like this can play out, given the unpredictability of virus transmission. War and sanctions are other factors impeding the international flow of materials and goods.<\/p>\n\n\n\n

Considering all these factors, Deutsche Bank thinks a U.S. recession could very well be evident in late 2023 into early 2024. Goldman Sachs sees a 35% chance of a recession in the same time frame. Fannie Mae, too, just steeply lowered its home sales forecasts to anticipate a mild recession in the second half of 2023.<\/p>\n\n\n\n

How Do Economists Know It Will Be a Mild Downturn?<\/h2>\n\n\n\n

People might hear \u201crecession\u201d and think of the mortgage crisis that unfolded between 2007 and 2009. But that level of severity is not what we\u2019re looking at now. Leading up to the 2008 mortgage default crisis, lenders had issued high-risk mortgages, encouraging too much debt. So people bought. Demand rose, and prices rose. Eventually, this created a real estate bubble.<\/p>\n\n\n\n

When the bubble popped, people lost the equity they had in their homes. Many faced crushing debt. Some of the mortgage lenders went out of business; others were bailed out by the government in 2008.<\/p>\n\n\n\n

Right now, most homeowners don\u2019t have such risky mortgages. And they\u2019re generally sitting on more home equity, now that real estate has seen price surges across the country. So it\u2019s not <\/em>likely that we\u2019re headed into a serious downturn.<\/p>\n\n\n\n

Now we\u2019ll take a look at what a recession, even a mild one, could mean for people at either end of the home purchase.<\/p>\n\n\n\n

Does Talk of a Recession Mean the Seller\u2019s Market Will Fizzle?<\/h2>\n\n\n\n
\"Image<\/figure><\/div>\n\n\n\n

Sellers have local factors, so there\u2019s no way to generalize how the current seller\u2019s market will change. That said, next year\u2019s sellers are unlikely to see the frenzied bidding wars that have peppered the market over the past two years. It\u2019ll take more time for many homes to sell. Why?<\/p>\n\n\n\n

As of April 2022, Fannie Mae economists are noting that the interest rates on home loans have shot up to 5%. Buyers are expected to balk at rates above 5%, especially if they think homes are overpriced. Buyers\u2019 growing concerns will almost certainly put a damper on the current seller\u2019s market for the remainder of 2022.<\/p>\n\n\n\n

Then, in 2023, Fannie Mae anticipates a real dip in the market, with the number of home purchases down nearly 10%. (This is a big deal, as Fannie Mae earlier predicted a 2.7% decline in home sales next year.)<\/p>\n\n\n\n

So, with buyer interest cooling, home prices will no longer be rising at a record-breaking pace.<\/p>\n\n\n\n

What Does This Mean for Frustrated Home Buyers? And Will Mortgages Be Easier or Harder to Get?<\/h2>\n\n\n\n

All of the above suggests that hopeful buyers who\u2019ve been sidelined but still want to buy a home could finally buy in. That said, there will still be plenty of tests for buyers\u2019 patience as they navigate the cooldown, because:<\/p>\n\n\n\n