RECESSION NOT ALL GLOOM AND DOOM

RECESSION NOT ALL GLOOM AND DOOM
The "R" word is back -- and this time economists ranging from former Fed chairman Alan Greenspan to the National Association of Realtors' Lawrence Yun agree that we're likely to be dealing with a declining economy for months to come. The U.S. has entered a recession," said Yun in his latest forecast, "and (the economy) will contract for the next three quarters."
Certainly the sobering reports we're seeing on retail sales point in that direction, and the stock market's sharp declines over the past few weeks suggest that investors are betting we're in a recession as well. But are all recessions always horrible times for real estate and home sales? You might be surprised to find that as long as mortgage money remains available, and home prices are affordable, real estate sometimes can weather recessions better than other segments of the economy.
Take the last national recession we experienced -- back in the years 2001 to 2003. Regional economies went flat or declined, consumer spending spiraled down, and nearly two million jobs were lost. Times were tough for a lot of families -- no question about it. But the vast majority of households kept their jobs, and people needed houses.
Sales of existing homes actually ran counter to the overall economic trends during that recession, with total sales rising from 5.2 million in 2001 to 6.2 million in 2003, according to National Association of Realtors data. Even sales of newly-constructed homes rose during that recession as well -- from 900,000 to 1.1 million.
Now, no one can be confident that the same countercyclical pattern will occur in a short, relatively shallow recession this time around. But some building blocks are in place: First, mortgage rates are lower than they were during 2001, 2002 and most of 2003. Lenders working through FHA, Fannie Mae and Freddie Mac have direct, federally-backed access to the capital markets.
Second, a $7,500 home buyer tax credit is already in place to provide an extra incentive to get potential purchasers off the sidelines, plus there are legislative stimulus package efforts in the works to increase the size of that credit, and extend it.
Finally, home prices in many local markets have corrected back to levels not seen since 2003 and 2004.
Combined with affordable mortgage money and unquestioned pent-up demand, housing's performance might -- just might -- surprise a lot of people who assume recessions are necessarily all bad, all the time.
For more information or to ask lake real estate questions, contact Michael at 877.365.cme1 (2631) or cme@yourlake.com You can also log your opinions on Michael’s real estate blog, www.AsTheLakeChurns.com