SEATTLE, Aug. 6, 2019 /PRNewswire/ -- Other than the
housing-led Great Recession of the late 2000s, home values have
typically continued to grow through national and statewide
recessions over the past quarter-century. This according to a new
analysis by Zillow®.
The U.S. reached its longest-ever economic expansion this
summer, though growth is slowing. A recent survey sponsored by
Zillow and conducted by Pulsenomics LLC found that a panel of
housing experts and economists most often expect the next recession
to begin in Q3 2020. Demand for homes is expected to cool during
the next recession, but few believe a housing slowdown will be a
significant factor in causing it.
As some market observers predict a recession on the horizon, an
analysis of recessions from the recent past shows that they often
have a limited effect on the housing market. In the past 23 years,
there have been two national recessions – the dot-com crash from
March to November 2001 and the Great
Recession from December 2007 to
June 2009i – and several
statewide or regional recessionsii. Home values broadly
fell across the country during the Great Recession, but in most
other cases annual home value growth remained positive.
Excluding the Great Recession, there have been 1,039 instances
since 1997 of states being in a recession during a given month.
Annual home value appreciation was positive 81% of the time in
these months – an identical rate to months in which states were in
economic expansion. Appreciation averaged 4.6% during economic
growth and 4% during recessions. This indicates that while
recessions do have an impact on the housing market, the widespread
collapse of home values during the Great Recession is an outlier.
"The housing crash during the Great Recession left a lasting
impression on our collective memory," said Zillow Economist
Jeff Tucker. "But as we look ahead
to the next recession, it's important to recognize how unusual the
conditions were that caused the last one, and what's different
about the housing market today. Rather than abundant homes, we have
a shortage of new home supply. Rather than risky borrowers taking
on adjustable-rate mortgages, we have buyers with sterling credit
scores taking out predictable 30-year fixed-rate mortgages. The
housing market is simply much less risky than it was 15 years ago,
and our experience in recent localized recessions shows how home
prices can weather normal economic headwinds."
As an example, several states with large energy sectors –
Alaska, Louisiana, North
Dakota, Oklahoma and
Wyoming – experienced local
recessions starting in 2015 when oil prices fell dramatically. Home
value growth was positive year-over-year across all five states and
only Alaska turned negative
month-over-month during this time period – the largest monthly loss
in value for the median home in Alaska was $700.
Nationwide, annual home value growth averaged 4.3% during these
recession months compared to 5.2% average growth during months of
economic expansion in 2015 and 2016.
About Zillow
Zillow® is transforming how people buy,
sell, rent and finance homes by creating seamless real estate
transactions for today's on-demand consumer. Zillow is the leading
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Zillow's proprietary data, technology and industry partnerships
put Zillow at nearly every major point of the home shopping
experience, helping consumers search for and get into their new
home faster. Zillow now offers a fully integrated home shopping
experience that includes access to for sale and rental listings,
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sell eligible homes directly through Zillow; and Zillow Home Loans,
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instantly connects buyers and sellers with its network of real
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process. For renters, Zillow's innovations are streamlining the way
people search, tour, apply and pay rent for leased
properties.
In addition to Zillow.com, Zillow operates the most popular
suite of mobile real estate apps, with more than two dozen apps
across all major platforms. Launched in 2006, Zillow is owned and
operated by Zillow Group, Inc. (NASDAQ:Z and ZG) and headquartered
in Seattle.
Zillow and Zillow Offers are registered trademarks of Zillow,
Inc.
i Dates according to the National Bureau of Economic
Research.
ii The Bry-Boschan method was used to estimate statewide
recessions, based on monthly State Coincident Indexes published by
the Federal Reserve Bank of Philadelphia. In this analysis, we allowed for
a minimum business cycle of 12 months and a six-month threshold for
each phase of the business cycle. We then reviewed Zillow Home
Value Index movements at the state-month level during these
estimated statewide recessions to assess what has historically
happened to home values during recessions.
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SOURCE Zillow