The economy is on a roaring run. Is a downturn imminent?
Experts in housing are predicting a recession starting in 2020, according to Zillow’s 2018 Q2 Home Price Expectations Survey; however, they anticipate monetary policy—not the housing market—as primarily responsible for the swing.
The Federal Reserve has been guiding fiscal policy since the Great Recession, gradually firming up interest rates—the Fed hiked rates recently, and there are fair odds the policymaker will do the same this summer, and once more after that this year. According to the experts surveyed, if the Fed moves too rapidly on rates, the economy could lose steam.
There are housing implications when rates rise. Not only can adjustable interest on mortgages rise; affordability can suffer, and confidence can be deterred—an impact more often pseudo-psychological than tangible. (According to an informal poll, 83 percent of our readers believe an increase in interest rates is “harmful to real estate.”) The adjustable mortgage rate is at an average 3.82 percent, according to Freddie Mac, and affordability is at its lowest in six years, the National Association of REALTORS® (NAR) reports.
Barring major market shifts, appreciation will continue on its current tear, according to the experts surveyed. They forecast home values will increase 5.5 percent in 2018, to a median $220,800.
“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,” says Aaron Terrazas, senior economist at Zillow. “Housing affordability 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.”
“Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for U.S. home prices,” says Terry Loebs, founder of Pulsenomics, which conducted the survey with Zillow. “These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective homebuyers.”
Over 100 experts participated in the survey. Article Source: RISMedia By Suzanne De Vita This blog claims no credit for any images posted on this site unless otherwise noted and are copyright to its respectful owners. If there is an image on this blog that belongs to you and do not wish for it to appear on this site, please contact us and it will be removed.
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