HOUSINGNEWS REPORT
RECESSION FEARS RISING: HOW HOUSING WILL HOLD UP
RECESSION #1
RECESSION #3
RECESSION #5
• December 2007 – June 2009 (1 year, 6 months) • GDP down 5.1 percent • Home prices decreased down 13.9 percent
• July 1990 – March 1991 (8 months) • GDP up 1.4 percent • Home prices down 0.9 percent
• January 1980 – July 1980 (6 months) • GDP down 2.2 percent • Home prices up 4.5 percent
RECESSION #2
RECESSION #4
• July 1981 – November 1982 (1 year, 4 months) • GDP down 2.7 percent • Home prices up 1.9 percent
• March 2001 – November 2001 (8 months) • GDP down 0.3 percent • Home prices up 4.8 percent
We project that full-year 2018 growth will reach 2.8 percent, one-tenth higher than in our prior forecast, before slowing to 2.2 percent in 2019 as fiscal impacts fade. Real estate and recession The great oddity of recessions is that while they sound fearsome they may not be so bad for real estate. “History shows us that a recession (broadly an economic event) does not necessarily imply declining house prices,” First American Chief Economist Mark Fleming tells Housing News Report . “In fact, in most recessions that has not happened. Price growth may slow down, not necessarily a bad thing, but actual depreciation? Far from a foregone conclusion.” If we look at the last five recessions going back nearly 40 years we often see rising home values and quick recoveries even as the general economy slows.
“What could possibly go wrong? I haven’t felt this good since 2006.”
LLOYD BLANKFEIN CEO, GOLDMAN SACHS, ON CNN
With December 2000 as “100” on the unadjusted Freddie Mac House Price Index, and with the typical existing home selling for $144,500 that month according to the National Association of Realtors, we can calculate the relationship between the last five recessions and home values. The most recent recession was by far the strongest recession in the past four decades, the 2007 downturn was directly related to the widespread sale of so-called “nontraditional” and “affordability” mortgage products, financing defined by such features as negative amortization, predatory prepayment penalties and the use of yield-spread premiums to market loans.
No doc, low doc, and NINJA (no income, no job, no asset) mortgage applications were widely used to qualify borrowers, meaning by definition that such loans were insufficiently underwritten. As mortgage balances rose because of negative amortization, and as home values faltered and then fell, many borrowers with toxic loans could neither afford monthly payments nor sell their homes for enough to cover the debt. The result was the worst foreclosure crisis since the Great Depression. “The profound events of 2007 and 2008,” said a report from the government’s Financial Crisis Inquiry
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AUG 2018 | ATTOM DATA SOLUTIONS
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