Transcript:
There’s been a lot of talk in the news lately about a recession, and it’s important that we know how that may impact the housing market, particularly if you’re considering a move in the near future. Hi, I’m Eric with Eric Andersen Homes, and this is your October, 2019 market update.
One point about the recession that’s interesting: if you ask one person, they will tell you the economic sky is falling. The next person will tell you the economy’s never been better. A lot of this confusion has to do with the fact that 2020 is an election year and the political motivations that drive a lot of this back-and-forth. To avoid this, we want to look at the data so we can get past the hype and make decisions that are responsible and based on fact, not political posturing. And this is true whether or not you’re looking at moving sooner or later. The simple fact is that now isn’t the right time for most of you watching this video to make a move. But it’s still important to stay informed so you can make the best decision when the time is right.
So back to the recession, 4 organizations were recently surveyed about when they thought it might begin. Few people are expecting a big crash like what we had in 2008, and one economist, Morgan Housel, said, “It might be over before we realized it began.” There seems to be a consensus on the point that the economy will be slowing down, and the majority believe 2020 is the year it will begin. So in the next 18 to 24 months, most economists and analysts think we’ll be in a recession.
As this next chart shows, recessions have been happening about once per decade, and with the last one being in 2008, we’re about due. However, what is more significant to note is how home prices have fared during recessions. And believe it or not, home values have actually grown during 3 out of the last 5 recessions. The dip in 1991 was less than 2%, and obviously 2008 was a major exception because it was the housing crisis that triggered the recession. But that’s not what’s happening now.
As you can see here, many of the same analysts who are projecting economic slowdown are also forecasting a rise in home values. Granted, it’s a slower rate of growth than we’ve had in the past, but it is growth nevertheless. So if you’re a buyer waiting for prices to come crashing down before buying, that’s not likely to happen. The experts may disagree on how much appreciation we will see, but it’s worth noting there isn’t a single red number on this chart.
The financial benefits of homeownership are undeniable. Let’s put some concrete numbers to this. If you take some of the most conservative appreciation estimates over the next five years on a $250,000 home, what do we see? Potential growth of family wealth in the amount of $37,750, which solely consists of the increase in home equity. So again, even with moderate appreciation, homeowners can expect to build almost $40,000 in wealth over the next five years. On the flip side, you know what else is going up? Rent. Here’s a look at the median asking rent since 2010. When it comes to owning vs. renting, it’s a simple choice, really. You can build your own equity, or you can build your landlord’s.
In addition to the clear financial benefits of homeownership, there are also a number of non-financial benefits to owning a home. A recent survey found that 93% of homeowners claim to be happier as a result of owning their home. 88% say buying a home is the best the decision they ever made. Think about that. Don’t ask the people who sell homes. Ask those who own them. And 9 out of 10 are saying it has not only made them happier, but that it’s the best decision they ever made. And 79% say owning a home has changed them for the better.
So that’s it for our October, 2019 market update. As always, don’t hesitate to reach out to me with any of your real estate questions or needs. I’m Eric with Eric Andersen Homes, and I’m here to provide you with a smarter approach to real estate.