An increasing number of home buyers expect a U.S. recession in the next three years, according to new survey data released Wednesday from realtor.com®.
Although they remain optimistic that it will be milder than the Great Recession, more than half of current home shoppers expect to put their home search on hold until the economy recovers. More than 36% of the 755 active buyers surveyed by Toluna Research this month expect the next recession to begin sometime in 2020.
When the same question was presented to 1,015 home shoppers in March 2019, just under 30% indicated they expected a recession in 2020. Additionally, 17% of current shoppers expect a recession to hit sometime in 2019, 14% expect sometime in 2021, and 7% expect sometime in 2022. 8% expect sometime in 2024 or later and 17% reported they didn't know.
Active buyers are defined as consumers who are currently shopping for a home.
As anxiety over a potential recession continues to rise in the U.S., the home shoppers recently surveyed are prepared to hit the pause-button on their home search until the clouds clear. Nearly 56% reported that if a recession hit they would halt their home search until the economy improved.
"Economic activity is cyclical, so yes, undoubtedly we will face another recession at some point in the future, but we do not expect it to be anything like 2008," said George Ratiu, senior economist at realtor.com®. "The next recession will likely be driven by factors outside of housing, such as a prolonged trade war, cutbacks in corporate spending or contagion from a European recession. Unlike 2008, mortgage underwriting has been more disciplined and regulated, which should provide a more secure foundation for housing during the economic ups and downs."
Despite recession concerns, home shoppers also believe a future downturn will be less severe than the housing crisis. Earlier this spring, 36% of home buyers were concerned that a future recession would be worse than 2008. However, that number has dropped slightly to 35% since then.
News of trade wars and weakening economies globally dominate the headlines, but overall home buyers are more optimistic than they were in March 2019. Nearly 44% of current shoppers feel an upcoming recession will be less severe than 2008, up from 40% this past spring. 22% feel it would be the same.
Moreover, home shoppers' views toward homeownership have become more optimistic. According to the survey, nearly 50% of home shoppers revealed they think more favorably about homeownership after the 2008 recession. This is up from nearly 45% earlier this spring. The share of home shoppers who said they felt very or slightly pessimistic toward homeownership following the 2008 recession dropped slightly from nearly 22% in March to 21% this August.
While potential buyers are becoming more confident and hopeful toward housing, those who are not currently shopping for a home have a much more bleak view of homeownership. According to the survey, 32% of active buyers indicated they are a lot more optimistic toward homeownership following 2008, whereas only 7% of non-buyers felt this way.
In similar fashion, non-buyers are nearly twice as likely, at 11%, to feel very pessimistic or slightly more pessimistic toward homeownership following 2008, versus just 6% for active buyers.
"When warned about an incoming storm, Americans know to prepare by stocking up on necessities and reinforcing their shelter. Similarly, given the cyclical nature of economic activity, consumers can and should prepare for the next downturn now. Taking steps to shore up their financial well-being, strengthening their professional networks and having adequate savings would provide cushioning during the slowdown," Ratiu noted.