Are Housing Trends Showing Signs of Upcoming 2020 Recession?
Real estate professionals everywhere are warning of our economy heading towards a recession in 2020. Now there might be some housing trends to back up the claims.
An area that has not received enough attention, according to Keith Jurow, is the “growing problem of re-defaults on (US home mortgage) modifications.” While 8.7 million permanent modifications were made since 2007, there is a reported 17 million temporary modifications made (according to the non-profit Hope Now consortium).
Even with the modifications, slightly more than half of the borrowers either re-defaulted or continued to remain delinquent according to the OCC.
The Market Watch also shows a graph provided by the Fitch report showing the Cumulative Default Rate by Number of Modifications. The housing trends show that two or even three plus modifications provide a spike in re-default rates.
Miami Housing Trends
Shifting focus to specific cities, the recent housing trends in Miami are also showing evidence of a possible collapse. Harris Kupperman (Moguldom.com) claims the prices South Beach are down 20-35% from peak prices. He continues explaining that the turn a profit on a rental is “mathematically impossible”, and “the only way owning is viable, is if prices go up and allow you to extract capital to fund the carrying costs – though debt service then makes the monthly cash flow much worse.” Kupperman warns that Miami has traditionally been a leader in the national market trends, meaning the national real estate market may be headed towards a similar pattern in the next year. We can compare patterns of the 2008 recession vs a possible 2020 recession.
Manhattan Housing Trends
A new report claims the “prices in Manhattan real estate took their biggest plunge since the 2008 financial crisis (Robert Frank, cnbc.com). The Douglas Elliman Q3 Report found average sales prices decreased 14.1%. Houses are still being sold, however the prices homebuyers will most likely receive at this time fall short of what the prices once were when they got their home for in 2014. There is an increasing number of luxury listings on the market, but a decreasing number of property values.
Foreseeing Economic Activity
Analyzing market trends in the housing industry can traditionally foresee economic activity. When times are good housing demand is high and prices rise, but when times are bad there is a surplus in property listings followed by low-bid offers on homes. What are your thoughts on a the timeline on when/if our country will enter a 2020 recession?