Recession: What Consumers Should Look For

Staying informed about the housing market’s health is crucial for both Buyers and Sellers. One significant concern that often arises is the possibility of a housing market recession. Understanding the signs of a housing market recession can help you make informed decisions when buying or selling a property. In this blog, we’ll explore the key indicators that may signal a downturn in the housing market.

1. Declining Home Sales:

One of the initial signs of a housing market recession is a noticeable drop in home sales. When consumer confidence wanes and uncertainty surrounds the economy, potential buyers tend to hold off on making significant financial decisions like purchasing a home. As a result, the demand for properties decreases, leading to lower sales numbers.

2. Rising Inventory Levels:

An oversupply of homes is another critical indicator of a possible recession. As home sales slow down, the number of unsold properties on the market increases. High inventory levels can drive down property prices, making it a challenging environment for sellers.

3. Stagnant or Decreasing Home Prices:

In a healthy housing market, property prices tend to appreciate gradually over time. However, during a recession, prices may either stagnate or even decline. Buyers may become hesitant to invest in real estate when they anticipate the potential for further price drops.

4. Lengthened Days on Market (DOM):

An increase in the average Days on Market (DOM) is a telling sign of a sluggish housing market. As homes take longer to sell, sellers might need to reevaluate their pricing strategy and be prepared for a more extended sales process.

5. Softening Rental Demand:

A housing market recession can also affect the rental market. If homeowners face difficulties selling their properties, they may opt to rent them out instead. This increased rental supply could lead to softer rental demand and put pressure on rental prices.

6. Employment and Wage Trends:

The broader economic landscape significantly influences the housing market. A decline in employment rates and wage stagnation can reduce consumer spending power and negatively impact the real estate market.

7. Tightening Lending Standards:

During a housing market recession, lenders may become more cautious about lending money for mortgages. They may tighten lending standards, making it more challenging for potential buyers to secure home loans.

8. Decreased Housing Starts:

Housing starts refer to the number of new residential construction projects beginning during a specific period. A decline in housing starts can indicate reduced builder confidence and a potential slowdown in the housing market.

While it’s essential to be aware of the signs of a housing market recession, it’s crucial to remember that the real estate market operates in cycles. Recessions are a natural part of these cycles, and they eventually give way to periods of growth and recovery. Staying informed about market trends and working closely with a Realtor (Here) to understand how to navigate challenging times and make informed decisions. By being aware of the signs discussed in this blog, consumers can better prepare themselves for potential changes in the housing market and make sound real estate choices.