Over the last few years, the U.S. economy has been gaining strength and viewed with general optimism. However, historians, economists, and real estate experts predict that the upward trend won’t last forever. A March 2019 survey by Realtor.com indicated that about 70 percent of home shoppers think that the United States economy will take a downturn within three years. The good news for new home builders is that the majority of those surveyed don’t expect the housing market to be worse than the 2008 crash. (41 percent believed it would be better, and 23 percent expected a similar impact.) Here, the builder risk management pros from Professional Warranty Service Corporation analyze the data from the survey and discuss why 2020’s recession anxiety may not be deterring new home buyers this summer.
When Will the U.S. See Another Recession?
The survey from Realtor.com captured the predictions of 1,015 home shoppers, the majority of who believe that the next recession will arrive within three years. But what are economists saying? A February 2019 poll by the National Association for Business Economics (NABE) indicated that 75 percent of economists think that the United States will see its next recession by the end of 2021. Scott Lanman and Katia Dmitrieva from Fortune explain that, while most economists surveyed expect growth to continue through 2019, the risk of a recession within the next couple of years is high. However, even with an imminent economic downturn, first-time home buyers are not deterred. According to Peter Suciu from Realtor.com, although home prices are rising, “it doesn’t appear that there’s a housing bubble about to burst due to bad mortgages and an over-inflated market.”
Risk vs. Long-Term Investment for First-Time Home Buyers
With a potential recession on the horizon, home shoppers are weighing the risk versus long-term investment opportunity
associated with purchasing real estate. Those surveyed by Realtor.com were active home shoppers, meaning that they planned to buy a home in 2019. Although a recession may indicate a struggling economy and the potential for stalled or slightly depreciated home values, many buyers remain optimistic. Because of low inventory in the housing market, property values might be protected if a recession hits by 2020 or 2021.
For some buyers, the long-term investment of purchasing a home outweighs the risk of an economic downturn. First-time buyers may feel more secure as property owners in the event of a recession. People need places to live, and many prefer not to move between homes, school districts, and cities if they don’t need to. Even if their homes don’t increase in value for the next few years, an unchanging mortgage payment with a low interest rate and the potential for equity over the next few decades is enticing enough to commit to buying a home now. The economic researchers at Freddie Mac forecast continued housing market growth due to record-low mortgage rates that saw a drastic decline in March 2019.
Attract Buyers with Home Builder Warranties and Other Builder Risk Management Solutions
A strong housing market with low mortgage rates and hopeful buyers is good news for new home builders. As a residential developer, the forecast of an approaching recession paired with a steady housing market still leaves several unknowns on the table. The best way to attract buyers and protect your bottom line is to offer home builder warranties from a trusted third party and embrace other risk management solutions.
Comprehensive builder structural warranties provide buyers with confidence, regardless of the market. In addition to home builder warranties, PWSC offers comprehensive builder risk management solutions including training programs, legal support, and claims resolution. Contact Professional Warranty Service Corporation to learn more about how home builder warranty programs can mitigate risk for your business.
