Why There Won’t Be a Recession That Tanks the Housing Market
There has been significant discussion about the possibility of a recession in recent years. This might cause concern that we are on track to experience a situation similar to the one in 2008. However, let's examine the most recent forecasts from experts to understand why this scenario is unlikely.
Jacob Channel, a Senior Economist at LendingTree, indicates that the economy is currently quite robust:
“At least right now, the fundamentals of the economy, despite some hiccups, are doing pretty good. While things are far from perfect, the economy is probably doing better than people want to give it credit for.”
This could explain the findings of a recent Wall Street Journal survey, which reveals that only 39% of economists anticipate a recession within the next year. This figure marks a significant decrease from the 61% who predicted a recession just one year ago, as illustrated in the graph below:
The prevailing view among experts is that a recession is unlikely in the next 12 months. One contributing factor is the current unemployment rate. To illustrate this point, let's analyze the current data alongside historical records from Macrotrends, the Bureau of Labor Statistics (BLS), and Trading Economics. Upon comparison, it becomes evident that the present unemployment rate remains remarkably low, as depicted in the graph below:
The orange bar represents the historical average unemployment rate since 1948, which stands at approximately 5.7%. Conversely, the red bar illustrates the aftermath of the 2008 financial crisis, during which the unemployment rate surged to 8.3% following the collapse of the housing market. Both of these figures significantly exceed the unemployment rate recorded this January, indicated by the blue bar.
However, the question remains: will the unemployment rate rise? To address this concern, let's examine the graph below. It utilizes data from the same Wall Street Journal survey to depict the experts' projections for unemployment over the next three years in comparison to the long-term average.
Bottom Line
The prevailing consensus among experts is that a recession is unlikely in the upcoming year. Additionally, they do not anticipate a substantial increase in the unemployment rate. Consequently, there is no need for concern about a surge in foreclosures capable of triggering a housing market crash.
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