With the U.S. economy on everyone’s minds right now, questions about the country’s financial outlook continue to come up daily. The one that seems to keep rising to the top is: when will the economy begin to recover? While no one knows exactly how a rebound will play out, expert economists around the country are becoming more aligned on when the recovery will begin.
According to the latest Wall Street Journal Economic Forecasting Survey, which polls more than 60 economists on a monthly basis, 85.3% believe a recovery will begin in the second half of 2020 (see graph below):There seems to be a growing consensus among these experts that the second half of this year will be the start of a turnaround in this country.
Chris Hyzy, Chief Investment Officer for Merrill notes:
“We fully expect the economy could begin to pick up in late June and July with a strong recovery in the fourth quarter.”
In addition, five of the major financial institutions are also forecasting positive GDP in the second half of the year. Today, four of the five expect a recovery to begin in the third quarter of 2020, and all five agree a recovery should start by the fourth quarter (see graph below):
The vast majority of economists, analysts, and financial institutions are in unison, indicating an economic recovery should begin in the second half of 2020. Agreement among these leading experts is stronger than ever.
On Monday, the National Bureau of Economic Research (NBER) announced that the U.S. economy is officially in a recession. This did not come as a surprise to many, as the Bureau defines a recession this way:
“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”
Everyone realizes that the pandemic shut down the country earlier this year, causing a “significant decline in economic activity.”
Though not surprising, headlines announcing the country is in a recession will cause consumers to remember the devastating impact the last recession had on the housing market just over a decade ago.
The real estate market, however, is in a totally different position than it was then. As Mark Fleming, Chief Economist at First American, explained:
“Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”
Four major differences in today’s real estate market are:
- Families have large sums of equity in their homes
- We have a shortage of housing inventory, not an overabundance
- Irresponsible lending no longer exists
- Home price appreciation is not out of control
We must also realize that a recession does not mean a housing crash will follow. In three of the four previous recessions prior to 2008, home values increased. In the other one, home prices depreciated by only 1.9%.
Yes, we are now officially in a recession. However, unlike 2008, this time the housing industry is in much better shape to weather the storm.