Economic Update: Why don’t economists think this will be like the great recession?

The short answer is strict lending practices, equity in the market and the continued low inventory of homes.

The declining inventory of homes is still putting upward pressure on prices. While it looks like a recession is still possible, homes for sale are still selling fast and often for more than the asking price. We expect interest rates to continue to fluctuate over the next year and for home prices to soften, but not stop rising.

What’s staggering is that over the last 25 years, the nation’s total housing inventory has averaged approximately two million homes for sale. Today, we are averaging about 980,000. During the great recession, inventory was at a remarkable four million homes!

While there has always been competition from investors, it hasn't been like what we have seen over the last year. One in four single-family homes across our nation was purchased by an investor. As you may be sensing, this is contributing to the rental pressure and the inability of Millennials to obtain housing.

Many well-qualified, motivated buyers feel stuck. Some are opting out of buying in hopes that the prices will start to stabilize, and rates will come down. As professional real estate agents who study the market, we aren’t seeing indicators of a major shift. We are experiencing some softening and this is mostly occurring in higher-end properties or overzealous sellers trying to push their value.

Considering that the average home price has gone from $40,000 in the 1970’s to almost $400,000 here in the 2020’s, it’s clear why real estate continues to be a great investment. But, just like anything that holds value over time, there are peaks and troughs.