Where go housing prices … and what about recession fears?

Hal DeKeyser

For Las Vegas home buyers and sellers, this is the weirdest market we’ve seen in nearly 20 years.

That is to say, it’s almost normal.

After a roller coaster price path since the early part of the century – where we went from the nation’s biggest boom to its biggest bust and then its highest percentage appreciation – things have settled down in Sin City housing prices.

Anyone who rode that roller coaster remembers when builder were producing 30,000 homes a year (and Vegas’ absorption rate is about 10,000) and housing prices were going to the sky. The we were the foreclosure crisis poster child. For the past few years, until about six months ago, housing price appreciation often led the nation (except it was really recovery rather than appreciation; we’re still under peak prices).

A change from 2018

Six months ago, a high 90 percentage of home went for asking price or more, and they didn’t stay on the market long.

That’s all changed. Prices are still stable – it’s not a repeat of the crash – but they’re not going up much, and houses are staying on the market 60-90 days with regularity. Price drops, a rarity six months ago, are now common.

The national story is similar. Case-Shiller says that price growth has slowed (not reversed) to a seven—year low, and a couple of monthly changes have been close to zero in other markets.

Las Vegas and Phoenix year over year continued to lead price appreciation, but that includes the time frame of the end of last year, when it was still rocking and rolling.

What does that mean for buyers and sellers?

Well, for buyers it means the search isn’t as frenetic as the house likely will still be on the market a half-hour after you see it. For sellers, it means more realistic pricing and quicker reductions. Many seller still need a reality check about value.

The good news for home sellers comes in a Core Logic report that predicts boosted values in the coming year nationally. In fact, it’s forecasting that prices will jump 5.4% by next summer. Where that will be most evident is in the lower priced segment, where the number of homes for sale is weak. Combined with historically low interest rates – and lower rates than just a few months ago – should be the biggest mover in prices.

“If low interest rates and rising income continue, then we expect home-price growth will strengthen over the coming year,” Frank Nothaft, CoreLogic’s chief economist said.

But what about the coming recession?

The good news for sellers comes in a Core Logic report that predicts boosted values in the coming year nationally. In fact, it’s forecasting that prices will jump 5.4% by next summer. Where that will be most evident is in the lower priced segment, where the number of homes for sale is weak. Combined with historically low interest rates – and lower rates than just a few months ago – should be the biggest mover in prices.

“If low interest rates and rising income continue, then we expect home-price growth will strengthen over the coming year,” Frank Nothaft, CoreLogic’s chief economist said.

Home-price gains will pick up speed in the coming year, with a 5.4% jump in the 12 months following July 2019, according to a forecast from CoreLogic. That would be a faster pace than the 3.6% annualized increase seen this July, CoreLogic said. Low mortgage rates coupled with a scarcity of real estate inventory are driving the increase, the data firm said.

. That would be a faster pace than the 3.6% annualized increase seen this July, CoreLogic said. Low mortgage rates coupled with a scarcity of real estate inventory are driving the increase, the data firm said.

But what about the coming recession?

A CNBC story noted that signs of recession are increasing and might slow the market this year or next. There’s the trade war with China, a slowing GDP growth and declining corporate profits. Those fears – if they are not realized dramatically – might even help the housing market as the Fed is signaling lower interest rates ahead.

But the next one isn’t supposed to be like the last one. None of the recessions in most Americans’ lifetime has not been the great housing bust recession. And economists predict that housing prices will do just fine during the next one, as has almost always occurred.

According to Zillow, different states have been in recession more than 1,000 times since 1997, and homes went up in prices there 81% of the time during those downturns. Appreciation fell a little, but continued on the upward path.

Jeff Tucker, a Zillow economist, says the differences are low inventory now compared to the early 2000’s overbuilding, and than “fog the mirror” loan approvals, buyers these days have better credit and take out predictable 30-years mortgages. It’s a much more stable environment.

“The housing market is simply much less risky than it was 15 years ago,” he said, “and our experience in recent localized recessions shows how home prices can weather normal economic headwinds.”

If these experts are correct, housing prices should go up with fairly normal 3-4% appreciation, and that could fall a half a percentage point if there is a recession. So if you buy a home now, don’t expect the north-of-12% appreciated we saw last year, but don’t expect the floor to wobble much either.