BY JENNIFER HAWKINS, TPCAR Board Director
Question: What are the similarities and differences between the potential recession we’re facing and what happened in 2008 in regard to housing? I would like to start off by saying recession does not equal housing crash. In fact the 2008-2009 recession is the only recession that created a housing crash in the history of our country.
The question is natural, as most of us still have the sting of the ‘08 recession fresh in our minds. I am here to set some things straight. 2007:
▪ Our country had a saturated supply of new homes (3.7 million units to a normal market of 1.2 million units).
▪ Lending regulations were nearly non-existent and fraudulently represented. ▪ The cash out refi boom created negative equity in homes. It was a perfect storm for a crash. Too much supply, over borrowing, and little to zero equity in existing homes. Now let’s compare that to today.
2022: ▪ Our country has less than three months of supply (620,000 units to a normal market of 1.2 million). ▪ Lending programs are now set to clear only the qualified. Stated income is no longer available nor are most zero down options. ▪ The average American homeowner, due to last year’s 24% increase in prices, has 50% or more equity in their home. This most recent refi boom, more than 30% of people refinanced for the lower rate not the cash out option.
Lack of inventory still holds us in a seller’s market, however the uptick of rates has caused an expected slowing of people buying, leading to homes sitting on the market longer. While homes are sitting longer we are not seeing the average sales price come down. The average days on the market over the last year hovered around six days while today we are averaging 26 (average market, 90 days).
So what does the potential recession we’re facing mean to the housing market? Here is my very politically correct answer: very little. Real estate is and always will be situational. If it is right for your current situation to sell, sell. If you have owned your home for north of five years, chances are high you are sitting on a ton of equity. People are still downsizing and families are still growing. If you fit that category, feel comfortable in your decision to make that move. How this potential recession is affecting housing is the rate influx in order to curb inflation. The days of multiple offers and homes going well above list are fewer and farer between. Buyers are savvy and are more in the driver’s seat today than they have been in years. Be prepared to sit tight for a little longer sellers. In today’s climate, buyers will likely come attached with home inspection, closing costs and appraisals.
The REALTOR associations nationwide are working with the Legislature to find ways to get more inventory on the market, especially more affordable inventory — meaning building incentives and density adjustments. We are on the forefront of those discussions on a local and statewide platform.
Jennifer Hawkins is a third generation REALTOR who has worked in Gig Harbor for 21 years. Hawkins served as president of the Women’s Council of REALTORS in 2019, and was treasurer of the Tacoma-Pierce County Association of REALTORS in 2021.