The resilience of the housing market is such that it will likely survive the next recession without home prices taking a substantial hit, according to a new report from title insurance firm First American Financial Services.
the housing crisis is still fresh on the minds of many, and was the
catalyst of the Great Recession, the U.S. housing market has
weathered all other recessions since 1980,” writes the report’s
author Odeta Kushi, deputy chief economist at First American.
report uses data from Freddie Mac and the National Association of
Realtors to illustrate how the market has fared in previous economic
downturns, and shows that home prices generally continue to
appreciate in such situations. However, existing home sales growth
will often decrease slightly during a recession, the data shows.
Great Recession was of course the exception to this rule, but in that
case the circumstances were quite different to normal, the report
notes. Last decade’s economic downturn was driven by a rapid
increase in home building and a major expansion of mortgage credit
availability. As a result, buyers were able to secure mortgages with
virtually no documentation of their income, and a minimal, or no down
housing crisis in the Great Recession was fueled heavily by the fact
that job loss was paired with a significant share of homeowners who
didn’t have much equity in their homes,” Kushi wrote.
fast forward to today and the home price increases we’ve seen
recently are driven more by a shortage of available inventory and
rising demand from buyers. Homebuilding has been sluggish and has
exacerbated housing shortages in many parts of the country. And more
homeowners have gained a significant amount of equity in their
properties due to these shortages and the high demand for housing.
the whole, homeowners have very high levels of tappable home equity
today, providing a cushion to withstand potential price declines,”
Kushi said. “In fact, the housing market may actually aid the
economy in recovering from the next recession—a role it has
traditionally played in previous economic recoveries.”
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