Market Health December 7, 2023

Why The Economy Won’t Tank The Housing Market

 

Why The Economy Won’t Tank The Housing Market

It’s important to note that economic forecasts and predictions can vary, and they are subject to change based on a variety of factors. The opinions of economists, as reflected in surveys like the one from the Wall Street Journal, provide insights into their current views, but the actual economic landscape can be influenced by unforeseen events and global developments.

If less than half of economists believe a recession will occur within the next year, it may suggest that there is some optimism about the economic outlook. However, economic forecasting is inherently uncertain, and unexpected events or shifts in economic indicators can alter these predictions.

It’s also worth considering that the global economy is interconnected, and events in one part of the world can have ripple effects. Factors such as geopolitical tensions, natural disasters, or sudden changes in market conditions can impact economic trajectories.

While economic forecasts are valuable tools for understanding trends, it’s crucial to approach them with a degree of caution and recognize the inherent uncertainty in predicting the future of complex and dynamic economic systems. It’s advisable for individuals and businesses to stay informed about economic developments and adapt their strategies accordingly, while also being prepared for a range of possible scenarios.

“Economists are turning optimistic on the U.S. economy… economists lowered the probability of a recession within the next year; from 54% on average in July to a more optimistic 48%. That is the first time they have put the probability  below 50% since the niddle of last year.”

If most economists no longer predict a recession, it suggests optimism about economic stability. Projections for the unemployment rate likely reflect expectations of either stability or improvement in the job market over the next few years. However, economic forecasts are subject to change based on various factors.

If expert projections about increased job losses are accurate, it’s concerning for individuals and their families. However, historical data from sources like Macrotrends and the Bureau of Labor Statistics (BLS) suggests that the current unemployment rate, being near all-time lows, might not lead to a housing market crash caused by widespread foreclosures. Historical context indicates that while job losses are impactful, they may not reach levels that historically correlate with such severe housing market disruptions.

The historical context provided by the orange and red bars on the graph highlights that, on average, the unemployment rate has been higher in the past, particularly during the 2008 financial crisis. The current unemployment rate, represented by the blue bar, is comparatively lower. Projections indicating that the unemployment rate is expected to remain below the 75-year average suggest a more optimistic outlook. This, in turn, implies that a severe wave of foreclosures impacting the housing market may be less likely, based on the historical correlation between unemployment rates and housing market conditions.

Bottom Line:

The majority of economists no longer predict a recession in the next 12 months, reducing the likelihood of a significant increase in the unemployment rate and a subsequent wave of foreclosures, similar to the past housing market crash. If you have specific questions about unemployment and its potential impact on the housing market, it’s advisable to consult with a real estate professional for more insights and guidance.