Macro Economic Trends are Showing Warning Signs of Recession
In taking a closer look at the internal numbers, here are some indicators we are seeing:
- Weekly mortgage refinances dropped to an 18-year low caused by continued spikes in interest rates.
- Toll Brothers (one of the nations largest homebuilders) announced 2nd quarter profits that missed Wall Street estimates due to higher cost, particularly rising prices for building materials and shortages of land and skilled workers. These constraints have left builders unable to plug an acute shortage of houses on the market, restraining home sales growth.
- US housing starts totaled 1.287 million in April, vs. 1.310 million starts expected.
- Nationally, new home sales fell by 1.5% in April according to the Commerce Department.
- Interest rates increasing a predicted 3 to 4 times this year.
- Keep a very close watch on the yield of the 10-year bond as it climbs into the mid-3’s (levels not seen since 2011). This will have a negative knock-on impact to mortgage rates – which are already approaching 5% for a 30-year fixed rate and climbing.
- Goldman Sachs Chief Economist just a few days also raised the alarm bells regarding the high levels of deficit spending (including the recent tax cuts), describing them as potentially threatening the fiscal security of the country. "An expanding deficit and debt level is likely to put upward pressure on interest rates, expanding the deficit further," he noted.
Where does this leave buyers and sellers of real estate?
A recent survey of economists carried out by The Wall Street Journal earlier this month says the economic growth that started in 2009 and which is the second-longest in U.S. history will likely end in 2020, they said. “The current economic expansion is getting long in the tooth by historical standards, and more late-cycle signs are emerging,” according to Scott Anderson, chief economist at Bank of the West, and one of the economists predicting a 2020 recession. Some 59% of private-sector economists in the Journal’s survey forecast a 2020 recession.
So even though the housing market likely won’t be the cause of the next recession, an economic downturn would still have an impact on real estate. Keep in mind, if and when there is a recession, expect mortgage delinquency and foreclosure rates to increase along with unemployment.
If you're thinking of selling:
Many economists appear to be suggesting to do it prior to 2020 predicting the next recession will begin some time in the first part of 2020 or perhaps late 2019:
If you're thinking of buying:
It may well be advantageous to act sooner rather than later with 30-year mortgage rates still available under 5%
Consider this for a moment, the way the housing market is supposed to function is pretty straightforward and follows a cycle:
Sales activity slows down…
Sales pick back up…
So…If you take the analogy of a baseball game with 9 innings, we are now in the later innings of the game as it relates to where we are in the current economic cycle.
Here is a quick video going into more depth of current economic indicators:
Check out the Palm Beach County market stats for April in detail here:
SINGLE FAMILY HOMES
|April 2018||April 2017||% CHANGE|
|Closed Sales (Paid In Cash)||612||571||7.2%|
|Median Sale Price||$350,000||$327,000|| 7.0%|
|Median % of Original List Price Received||95%||94.5%||0.5%|
|Median Days to Contract||42||46|
|Inventory (Active Listings)||7,233||7,481||-3.3%|
|Months Supply of Inventory||5.0||5.1||-2.0%|
|TOWNHOUSES / CONDOS||April 2018||April 2017||% CHANGE|
|Closed Sales (Paid In Cash)||900||824||9.2%|
|Median Sale Price||$181,750||$165,000||10.2%|
|Median % Original List Price Received||93.5%||93.5%||0.0%|
|Median Days to Contract||51||52||-1.9%|
|Inventory (Active Listings)||6,495||6,452||0.7%|
|Months Supply of Inventory||5.9||5.9|
The Palm Beach County market statistics are courtesy of your REALTOR®, a proud member of the Realtors® Association of the Palm Beaches (RAPB). RAPB represents over 14,000 members involved in all aspects of residential and commercial real estate.
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