Inflation is at a 40-year high, interest rates are going up, and many are finding themselves feeling nervous about the economy right now. The word “recession” has been circling lately, and some are even asking about a potential housing market crash. With all this anxiety, I want to cover some important points in regards to the “R” word, housing market, and the economic outlook this year.
What is a Recession?
Simply put, a recession is when the economy seems stuck and may be on the decline for a period of time. This can be a difficult topic to think about if you or your family felt the impact from the 2008 financial crisis; which was heavily tied to the housing market crash that happened during that time. After 2008, some of the home values in the Las Vegas area plummeted by 50%, and some are only just now recovering from the money they lost. People have been recalling this event, wondering if we will be facing the same issues with the housing market this time around. I would like to clear some air with this blog and hopefully answer some questions around the economy and a housing market crash.
The first thing to make clear is that high inflation does not have the same impact on real estate as it does on other economic factors. In fact, high inflation often correlates with rising home prices. The rate of growth may slow down, and you may not have the 20 buyers for your house, but housing prices rarely go down when inflation is high; which means that the potential of a recession in 2022 will not have the same impact on the housing market as 2008. Further, many protections have been put in place since the 2008 housing market crash to avoid that type of housing bubble from happening again. In other words, the real estate market learned their lesson in 2008 and has since decided to protect the consumers, which is comforting news to hear.
Investor Activity In Housing Market
On another note, I have personally witnessed a high amount of investor activity, which means investors are still receiving ROI’s in the housing market. In April, 32% of all local property sales in Las Vegas closed as cash purchases, which also likely signals a healthy amount of investor activity in the market. If investors are still putting money on the table, this is a good sign and a strong indicator that housing is still a lucrative investment and won’t be declining anytime soon. Put yourself in the investor’s shoes for a moment, and think about the risk on their end if the housing market were to plummet. I advise anyone to follow the activity of investors in the housing market for honest answers, because they point us in the right direction.
Advice for Homeowners
We are feeling the first signs of a potentially rocky economy. But, before making any drastic moves, there are other important factors to consider. According to Andrew Smith, president of Las Vegas-based Home Builders Research: “Our friends on the resale side of the market are still sharing stories of homes selling at or above list price within days, sometimes even before being officially listed.” Many homeowners are still receiving multiple offers over the list price, and “the ultra-low supply and sustained demand will mean sales of both new and resale homes will remain strong.” We may not see the activity of 2021, but real estate is still in a healthy position locally.
A Different Perspective on the Housing Market Crash
Instead of viewing the latest economic activity as a recession that will crash your home value, it is best to view it as a metric to inform us when the next crash might occur. Everything is trend related and we want to cover all bases before panicking. From one perspective: we are entering a housing bubble due to high inflation rates and geopolitical fragility. From another perspective, severely low supply is also helping fuel demand and higher home prices; yet another reason why housing experts continue to say that the market will remain strong for many years to come.
How you wish to view this dilemma is entirely up to you, but I hope this blog brought some clarity and alleviated stress in regards to a potential housing market crash in 2022.
Connect Today To Learn More
If you enjoyed what you read here today, stay up-to-date with the latest Las Vegas real estate news here. Are you eager to know more about the housing market this year? Let’s connect and we can discuss more about your housing situation, needs, and expectations. I’m happy to help!