Photo: Robert Clark
The US will likely enter into its next economic recession sometime in 2020.
Monetary policy will likely be the trigger, according to a panel of real estate experts and economists surveyed by Zillow and Pulsenomics.
Nearly half of the panelists agree that the crisis is likely to start in the first quarter of 2020 while more than half of respondents believe monetary policy will be the chief cause. Less than a year ago, panelists in this same survey cited “geopolitical crisis” as the most prominent and likely cause of the next recession.
Geopolitical concerns have now dropped below policy-related fears like trade policy, a correction in the stock market or an unexpectedly high inflation rate, says Zillow.
The current economic expansion is the second longest in US history and would become the longest if the panelists’ predictions prove to be accurate.
“As we close in on the longest economic expansion this country has ever seen, meaningfully higher interest rates should eventually slow the frenetic pace of home value appreciation that we have seen over the past few years, a welcome respite for would-be buyers,” Zillow Senior Economist Aaron Terrazas says in the digital release.
And while the housing market collapse triggered the Great Recession, only 9 of the 100 panelists believed the housing market would be at the center of the next recession.
Panelists are specifically concerned about the Federal Reserve raising of short-term interest rates. Although the economy is “doing well” as evidenced by GDP growth and near historic low levels of national unemployment, raising rates too quickly could “push the economy toward slower growth, leading toward a recession,” panelists warn.
Still, experts predict the housing market will continue to see strong appreciation, with home values rising 5.5 percent annually to a median of $220,800 in 2018. This is above the 3.7 percent rate of home price appreciation the panel predicted at this time last year.
“Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for U.S. home prices,” Pulsenomics founder Terry Loebs says in the digital release.
The housing market’s present conditions are overshadowing concerns about interest rate increases turning off some prospective homebuyers, according to Loebs.
Click here to read the entire release.