If you’re worried about a coming recession, you’re not alone. Over the past couple of years, there’s been a lot of recession talk. And many people worry, if we do have one, it would cause the unemployment rate to skyrocket. Some even fear that a spike in unemployment would lead to a rash of foreclosures similar to what happened 15 years ago.

However, the latest Economic Forecasting Survey from the Wall Street Journal (WSJ) reveals that, for the first time in over a year, less than half (48%) of economists believe a recession will actually occur within the next year:

“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 middle of last year.”

If over half of the experts no longer expect a recession within the next year, you might naturally think those same experts also don’t expect the unemployment rate to jump way up – and you’d be right. The graph below uses data from that same WSJ survey to show exactly what the economists project for the unemployment rate over the next three years (see graph below):

If those expert projections are correct, more people will lose their jobs in the upcoming year. And job losses of any kind are devastating for those people and their loved ones.

However, the question here is: will there be enough job losses to cause a wave of foreclosures that will crash the housing market? Based on historical context from Macrotrends and the Bureau of Labor Statistics (BLS), the answer is no. That’s because the unemployment rate is currently near all-time lows (see graph below):

As the orange bar in the graph shows, the average unemployment rate dating back to 1948 is 5.7%. The red bar shows, the last time the housing market crashed, in the immediate aftermath of the 2008 financial crisis, the average unemployment rate was up to 8.3%. Both of those bars are much higher than the unemployment rate today (shown in the blue bar).

Moving forward, projections show the unemployment rate is likely to stay beneath the 75-year average. And that means we won’t see a wave of foreclosures that would severely impact the housing market.

Boston Condos and the Bottom Line

Most economists no longer expect a recession to occur in the next 12 months. That’s why they also don’t expect a dramatic rise in the unemployment rate that would lead to a rash of foreclosures and another housing market crash. If you have questions about unemployment and its impact on the housing market, let’s connect.

Updated: Boston condo for sale website 2023

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Is the economy back to normal? It’s the question everyone wants to be answered as we navigate through a semi-return to normalcy amid the pandemic, and it’s the question Dr. Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), posed as he opened the Residential Economic Issues & Trends Forum at NAR’s annual REALTOR® Conference & Expo

While several market indicators lagged throughout the pandemic, the housing industry was an outlier, experiencing better than average conditions that have been sustained over the course of the last two years. But how long will it continue?

“All markets are seeing strong conditions and home sales are the best they have been in 15 years,” said Yun. “The housing sector’s success will continue, but I don’t expect next year’s performance to exceed this year’s.”

At the moment, home sales are the standout. And although there should be a slowdown going into 2022, said Yun, they will likely remain above pre-pandemic levels. The outcome, however, will largely depend on the influx of inventory, and as mortgages exit the forbearance program, we should begin seeing additional homes enter the market.

“With more housing inventory to hit the market, the intense multiple offers will start to ease,” Yun said. “Home prices will continue to rise but at a slower pace.”

Affordability has been a real challenge these last two years, with low mortgage rates and high buyer demand providing some balance. But now with rates rising as we come out of the pandemic, fears concerning inflation are surfacing.

Yun predicted that mortgage rates will see an increase of 3.7% in the coming months, a rise he attributes to persistently high inflation. Home prices rose by 12% on average in 2020 and 2021, while inflation rose 3%.

“Rising apartmenr rents will continue to place upward pressures on inflation,” he said. “Nevertheless, real estate is a great hedge against inflation.”

In terms of a bubble for 2022, the signs are just not there. While home prices have outpriced people’s income overall, said Yun, with value growth matching up to 2005 levels, we don’t have an oversupply situation or risky subprime lending like we did during the last market crash.

An area to watch, which fell behind as a direct result of the pandemic, is the jobs market. According to Yun, since the lockdowns were lifted, 18 million jobs have been created, but we are still behind by 4 million jobs compared to pre-COVID levels.

The increased remote work trend could have a long-term impact on jobs and work preferences, affecting how and where people choose to live.

“We are only in the first innings of work-from-home options,” Yun said. “People have not fully digested the work-from-home-flexibility model yet in determining home size and locational choice.”

For more information, please visit www.nar.realtor.

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Boston Real Estate for Sale

Well, so far the economic indicators are improving, which is good news for the Boston real estate for sale market

The September Jobs Report issued by the Bureau of Labor Statistics reported that the unemployment rate dropped to 7.9%. Though that percentage is well below what experts projected earlier this year, it still means millions of people are without work. There’s no way to minimize the tremendous impact this pandemic-induced recession continues to have on many Americans.

However, the latest Home Purchase Sentiment Index from Fannie Mae shows how more and more Americans believe the worst is behind us, and their personal employment situation is good. The index revealed:

“The percentage of respondents who say they are not concerned about losing their job in the next 12 months increased from 78% to 83%, while the percentage who say they are concerned decreased from 22% to 16%. As a result, the net share of Americans who say they are not concerned about losing their job increased 11 percentage points.”

Americans Are Game-Changers Too

Americans are naturally optimistic and have always responded to challenges with both resiliency and resourcefulness. Today is no different. As an example, the Wall Street Journal (WSJ) just reported:

“Americans are starting new businesses at the fastest rate in more than a decade, according to government data, seizing on pent-up demand and new opportunities after the pandemic shut down and reshaped the economy.”

Why would someone start a business in the middle of an economic crisis? The WSJ explains:

“The jump may be one sign that the pandemic is speeding up ‘creative destruction,’ the concept…to describe how new, innovative businesses often displace older, less-efficient ones, buoying long-term prosperity.”

The WSJ also notes that these new businesses will have a positive impact on the overall employment situation, as new businesses “are a critical engine of job creation. Startups have historically accounted for around one-fifth of job creation.”

Boston Real Estate and the Bottom Line

For the millions of Americans still unemployed, we hope for a quick return to the workforce. We should, however, realize that over 90% of people are still employed, and some are venturing into new business start-ups. Perhaps the next big game-changing company is right around the corner.