The “Dreaded ‘R’ Word
Have you been hearing the dreaded "R" word lately? 🤨 Yep, you guessed it, I'm talking about recession. People seem to get really amped up when they hear this word tossed around, so I wanted to shed some light from the real estate perspective. 💡
Check out this cool chart on the Seattle Home Price Index linked below. 📈 Do you see what I see? The Dot Com Recession took place from March 2001 to November 2001, but home prices remained steady. ⚖️ The only large fall we see here was during the Great Recession of 2008/2009. This one was caused BY HOUSING, so naturally prices were affected. 💵
If we go further back in time to look at home prices amidst the Gulf War Recession from March 1990 to March 1991, we see that prices actually rose 3.5%. And most recently during the COVID Recession, prices skyrocketed due to low interest rates and soaring demand. 💰
The moral of the story here? History shows us that recession doesn't necessarily equate to a major crash of home prices. (Or any downward slide at all.) 🛝
One of our trusted lenders, Kyle Bergquist at American Pacific Mortgage, sites a few key items that should help us fare pretty well should we enter a recession this summer:
1. "A three year buildup of buyers who couldn’t buy during the high competition of 2020 and 2021, and then put the brakes on their house hunt as interest rates skyrocketed in 2022.
2. Relatively lower unemployment than previous recessions (for now, anyway.)
3. A considerably more dramatic drop in mortgage interest rates than we’ve had in previous recessions.
4. And a seller-pool who is much less excited at the prospects of a 5% interest rate than the buyer-pool is. Said another way, sellers will be less motivated to sell than buyers will be to buy over the next 12 months or so, which will result in competition and upward pressure on prices."
The media will put lots of doom and gloom on this topic. ⛈️ But when we really dig deep into the history of things, we can see positive outcomes in the real estate world are actually highly feasible during a recession! Especially here in the PNW. 🌟