Well, in Metro Detroit, mortgage rates shot up, and now the headlines are calling for a recession, and we are now on a stagflation watch. The number one question being asked: Will a Recession Crash the Housing Market in 2024❓
Will a Recession Crash the Housing Market in 2024
There’s been a lot of buzz lately about the possibility of a recession. The thought of a recession raises concerns, recalling the tough times in 2008 in Metro Detroit. However, it’s important to note the unique circumstances that led to the Great Recession. 2008 was primarily driven by high unemployment and rampant overborrowing against home equity. Current indicators and expert analysis suggest we’re in a different situation today.
Jacob Channel, Senior Economist at LendingTree, points out that despite some challenges, the economy is more robust than many believe:
“At least right now, the fundamentals of the economy, despite some hiccups, are performing quite well. While far from perfect, the economy is likely better than many acknowledge.”
Recession Concerns Reemerge
Based on the September Jobs report, economists predict the Fed is close to achieving the all-elusive economic soft landing. The first interest rate cut of 50 basis points was at the end of the September Fed meeting. This is the start of the easing of Fed Policies, and it will cause hiccups along the way with mortgage rates. It’s only temporary.
There was a wobble in Mortgage Rates in October, which increased by 50 basis points. That’s mainly caused by the Feds’ now-in-progress policy changes that affect the 10-year Treasury Yield and mortgage-backed Securities. If you don’t know how mortgage rates are determined Metro Detroit, I recommend visiting “Cracking Today’s Mortgage Rates: What’s causing the Change.”
How Unemployment Impacts Recession Risks
The stability of today’s job market in Metro Detroit further reinforces this confidence. The financial crisis of 2008 started with unemployment. When the housing market crashed, the unemployment rate was 8.3%. To make matters worse, homeowners used their home equity like an ATM. The lending practices and appraisals were out of control. Homeowners borrowed money more than their house was worth. That’s why we have new laws, and the Dodd-Frank Bill became law in July 2010. In most cases today, homeowners have equity and lots of it.
Now, let’s review the past 12 months of unemployment from Trading Economics. As you can see, unemployment is still historically low. Source: Trading Economics
But Will the Unemployment Rate Go Up?
To answer that, look at the graph below. It uses data from that same Wall Street Journal survey to show what the experts are projecting for unemployment over the next three years compared to the long-term average (see graph below):
Looking ahead, projections indicate that the unemployment rate is expected to remain well below the 75-year average, suggesting stability rather than a spike in job losses.
Although job losses are challenging for individuals and their communities, the expected mild increase in unemployment isn’t likely to lead to a significant number of foreclosures or a crash in the housing market.
Does a Recession Automatically Mean Falling Home Prices
It’s a common misconception that home prices always fall during a recession. Home Buyers and Sellers are concerned that a Recession could Crash the Housing Market. However, historical data shows home prices have appreciated in four of the six last recessions since 1980. This demonstrates that economic slowdowns do not necessarily result in declining home values.
Unlike the 2008 scenario—where a surplus of homes and a flood of distressed properties caused prices to plummet—today’s market conditions are quite different. A dramatic crash is unlikely with a limited housing supply, even if prices adjust slightly. If you want to view a foreclosed property in Metro Detroit, you can now access the multiple listing service. Check it out🤩
Are You Curious about What Home Prices are Now
#1 Step ~ Your Instant Home Valuation Report
#2 Step ~Sold Home Prices
Take control of your home-buying and home-sellingjourney in Metro Detroit with direct access to our Multiple Listing Service (MLS) through our unique bridge access feature. You’ve got access to up-to-date sold data, too. Skip the negative headlines and get the facts straight from the source. A video is provided to help you learn how to use the MLS. Start exploring now and make informed decisions with ease!
Macomb County Sold Home Prices
Oakland County Sold Home Prices
What a Recession Means for Mortgage Rates
Typically, mortgage rates decrease during economic slowdowns as the Federal Reserve cuts interest rates to encourage spending and stimulate the economy. This leads to more affordable mortgage rates, creating opportunities for homebuyers.
Currently, mortgage rates have been volatile, mainly reacting to high inflation, with rates fluctuating above 7%. If a recession occurs, we might see rates dip below these levels, although the days of 3% rates are probably gone.
Let’s Decode the Housing Market Together! Let’s Connect ⤵️
Wow 😮, there’s a lot to consider! Whether looking to buy a new home or considering selling in Metro Detroit, keeping up with the latest housing market trends is essential. After all, these numbers impact your decisions and your money. Let’s simplify the process together. Schedule a Zoom call with me, and we’ll review the data. I’ll share my screen so you can see the market insights clearly and feel confident about your next steps.
Conclusion
Despite the frequent headlines, the consensus among experts is optimistic, indicating a low likelihood of an imminent recession crashing the housing market. Based on all the data, we don’t need to worry about a recession crashing the housing market in 2024. This forecast and a stable unemployment rate suggest the Metro Detroit housing market will remain resilient. Homeowners and buyers should feel reassured that a flood of foreclosures or a crash in housing prices is unlikely, even if the economy faces minor setbacks. To keep up to date, consider signing up for our Newsletter about the latest trends and updates in Metro Detroit.
More Help Is 1️⃣ Click Away⤵️
