Why the Economy Won’t Tank the Housing Market

<article class="post-862974 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-862974"><span class="entry-date">November 29, 2023</span><div class="entry-header center-block text-center"><h1 class="entry-title">Why the Economy Won’t Tank the Housing Market</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=Why+the+Economy+Won%E2%80%99t+Tank+the+Housing+Market&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fwhy-the-economy-wont-tank-the-housing-market%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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</div></div><div class="post-tax post-category"><span></span><a href="../category/realtor-blog/index.html" rel="tag">Realtor Blog</a></div><div class="post-tax post-post_tag"></div></div><div class="entry-content"><div><img alt="Why the Economy Won’t Tank the Housing Market Simplifying The Market" decoding="async" loading="lazy" src="https://media.agentaprd.com/sites/222/20231129-Why-the-Economy-Wont-crash-the-housing-market.webp" style="display: block; margin-bottom: 5px; clear: both; max-width: 100%;" width="358"/>
<p>If you’re worried about a coming recession, you’re not alone. Over the past couple of years, there’s been a lot of recession talk. And many people worry, if we do have one, it would cause the unemployment rate to skyrocket. Some even fear that a spike in unemployment would lead to a rash of <a href="https://www.simplifyingthemarket.com/2023/10/31/foreclosures-and-bankruptcies-wont-crash-the-housing-market/?a=712984-fa409495d5d70154d03a25e81e9540e2" rel="noopener noreferrer" target="_blank">foreclosures</a> similar to what happened 15 years ago.</p>
<p>However, the latest <a href="https://www.wsj.com/economy/a-recession-is-no-longer-the-consensus-3ad0c3a3" rel="noopener noreferrer" target="_blank"><em>Economic Forecasting Survey</em></a> from the <em>Wall Street Journal</em> (WSJ) reveals that, for the first time in over a year, less than half (48%) of economists believe a recession will actually occur within the next year:</p>
<blockquote><p><em>“</em><strong><em>Economists are turning optimistic on the U.S. economy </em></strong><em>. . . </em><strong><em>economists lowered the probability of a recession within the next year</em></strong><em>, from 54% on average in July to a more optimistic 48%. That is the first time they have put the probability below 50% since the middle of last year.”</em></p></blockquote>
<p>If over half of the experts no longer expect a recession within the next year, you might naturally think those same experts also don’t expect the unemployment rate to jump way up – and you’d be right. The graph below uses <a href="https://www.wsj.com/economy/economic-forecasting-survey-archive-11617814998" rel="noopener noreferrer" target="_blank">data</a> from that same WSJ survey to show exactly what the economists project for the unemployment rate over the next three years (<em>see graph below</em>):</p>
<p><a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20231127/20231129-Unemployment-Projections-for-the-next-3-Years.png" rel="noopener noreferrer" target="_blank"><img decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20231127/20231129-Unemployment-Projections-for-the-next-3-Years.png"/></a> </p>
<p>If those expert projections are correct, more people will lose their jobs in the upcoming year. And job losses of any kind are devastating for those people and their loved ones.</p>
<p>However, the question here is: will there be enough job losses to cause a wave of foreclosures that will crash the housing market? Based on historical context from <a href="https://www.macrotrends.net/countries/USA/united-states/unemployment-rate" rel="noopener noreferrer" target="_blank"><em>Macrotrends</em></a> and the <a href="https://www.bls.gov/news.release/pdf/empsit.pdf" rel="noopener noreferrer" target="_blank"><em>Bureau of Labor Statistics</em></a> (BLS), the answer is no. That’s because the unemployment rate is currently near all-time lows (<em>see graph below</em>):</p>
<p><a href="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20231127/20231129-Unemployment-Rate-Near-All-Time-Lows.png" rel="noopener noreferrer" target="_blank"><img decoding="async" src="https://files.keepingcurrentmatters.com/KeepingCurrentMatters/content/images/20231127/20231129-Unemployment-Rate-Near-All-Time-Lows.png"/></a> </p>
<p>As the orange bar in the graph shows, the average unemployment rate dating back to 1948 is 5.7%. The red bar shows, the last time the housing market crashed, in the immediate aftermath of the 2008 financial crisis, the average unemployment rate was up to 8.3%. Both of those bars are much higher than the unemployment rate today (<em>shown in the blue bar</em>).</p>
<p><strong>Moving forward, projections show the unemployment rate is likely to stay beneath the 75-year average. And that means we won’t see a wave of foreclosures that would severely impact the housing market.</strong></p>
<h3>Bottom Line</h3>
<p>Most economists no longer expect a recession to occur in the next 12 months. That’s why they also don’t expect a dramatic rise in the unemployment rate that would lead to a rash of foreclosures and another <a href="https://www.simplifyingthemarket.com/2023/09/27/why-todays-housing-inventory-shows-a-crash-isnt-on-the-horizon/" rel="noopener noreferrer" target="_blank">housing market crash</a>. If you have questions about unemployment and its impact on the housing market, connect with a <a href="https://www.simplifyingthemarket.com/2023/10/30/a-real-estate-agent-helps-take-the-fear-out-of-the-market/" rel="noopener noreferrer" target="_blank">real estate professional</a>.</p>
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