The Fear of a Recession!!

The Fear of a Recession!!!
Video Transcription

… very good possibility we’re going to be going into a recession over the next 18 months. Hi, my name is Dick Jones, Broker/Owner of D. Jones and Associates. There were four surveys done recently by Wall Street Journal, Duke University, National Association of Business Economists, and Pulsenomics, and these are the results. 21% of the people felt that we’re going to be going to recession this year, 40% next year, 24% in ’21, and 10% in 2022. That means 67% of the people feel between now and the end of next year, we’re going to be going into a recession. However, recession does not equal a housing crisis. The definition of recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two consecutive quarters.

Now let’s take a look back at the last five recessions that we’ve had. Obviously, let’s start with 2008. In 2008 we had 19.7% depreciation in that year. Now remember, this is nationwide depreciation, and that’s with the other graphs that I showed you. In California alone, specifically in Brentwood, that’s my base, I sold a bunch of bank owned properties from 2008 to 2014. When I did my BPO, a broker price opinion for the banks and they would have an appraisal done to determine the price of that home to put it up for sale. Basically the way I did it is I cut it in half, 50%. If it sold for $600,000 I’d get $300,000. I would go up and down from there. It worked for me, and my scorecard where 99% most of the time. So basically in California, in this region anyway, depreciation was 50%, not 19.7%. That’s nationwide. Keep in mind on the other charts that I show you, this is a nationwide survey.

In 2001 we had 6.6% of appreciation, and then in 1991, we had 1.9 depreciation, less than 2%. In 1981, we had 3.5% appreciation. In 1980, we had 6.1% appreciation, and the reason I remember 1981 at 3.5% appreciation, that’s when I bought my first house, during that recession in 1981, and it was the best move I ever made. What’s going to trigger the next recession? Well, the top three triggers for next recession is, number one, trade policy, number two, stock market correction, number three, geopolitical crisis, and coming in at number nine is the housing slow down. The mortgage industry caused the housing slow down in 2008. This year we’re not even close. We’re not even in the top eight reasons that a recession might take place, and by Morgan Housel, a well-known financial analyst, “An interesting thing is the widespread assumption that the next recession will be as bad as 2008. natural to think that way, but statistically, highly unlikely. Could be over before you realize it began.”

The same people on the same survey about going into a recession over the next 18 months are also projecting where the prices are going to be over the next five years. Now remember, these are the same people who said we were going into a recession and are also saying we will not see any depreciation over the next five years. Now, this is what they’re projecting over the next five years. We’re going to finish out this year at 4.1% appreciation. Next year they’re anticipating on 2.8% appreciation. In ’21, 2.5 appreciation, which is lower than the norm. 3.6% to 4% is usually the norm of appreciation per year over the years. In 2022, they expect 3.0 appreciation, and 2023, they anticipate on 3.4 appreciation, so we’re anticipating on getting more appreciation. However, it will not be at the historic norms of 3.6 to 4.0.

In conclusion, I just wanted to convey to everybody that don’t let a recession, the fear of a recession, hold you back from making a great investment in a home at the present time, because we have a lot of factors that are going our way. The interest rates are historically low, and in fact, if the interest rates go any lower, which we anticipate later this year, it’ll be the most affordable time to buy a home since 1990 prior to 2008 bust. We have a lot of factors going in our way with the inventory being low, the economy being strong, so the outlook looks very, very bright. I hope this was beneficial for you, and if you have any questions, please don’t hesitate to give me a call. Thank you.

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