Desperate to find a headline to scare readers, the real estate industry creates a new term: Housing Recession.
Now, I have never heard of that term or seen it in my 36 years in this business.
I mean, I know what a recession is, or I used to. The term used to mean 2 consecutive quarters of declining Gross Domestic Product, until it became another political football. The term gross domestic product refers to all the economic activity of the economy, and generally refers to all businesses.
So, what is a housing recession? Consumers, homeowners, or buyers be misled into thinking it means prices are dropping, but specifically, it means the business of housing is dropping: fewer sales for real estate agents, fewer new homes built, etc.
That said, the decline in housing activity is to be expected. Just like Peloton, which enjoyed historic sales when the country was locked down, and technology makers, which benefitted when home offices needed more computer equipment and related items, the activity is moving back to a normal economy and is to be expected.
Also, remember, if housing prices have increased by 44% over the past 2 years on average, a drop in sales of 20-30% at those higher prices means the total of sales is still HIGHER!
So, these shell games let the usual players in the fake real estate news create impressive headlines that are really not accurate.
First offender, Fortune Magazine.
Their headline shouts:
But when you look at the article, even before the paywall, it really tells you that sales and new homebuilding are dropping. And note the headline when you break it down, 2023 will be worse than 2022, yet 2022 was still an amazing year of increased housing prices overall, despite war in Europe, COVID, and everything else. So, really, what does the headline say?
Next Fortune has another article titled:
Yet, the 2 charts are mortgage rates, which rose in June and have stayed in the 5.5% to 6% range since, and the mortgage payment-to-income ratio or affordability ratio, which their own chart shows is declining.
Not only do these two charts show no key change in the direction of the market in the future, but even the article is full of “ifs” and hedging.
But the liar of the week award goes to Yahoo! Finance. Their headline screams:
So, this is not just saying that prices will decline, but they will CRASH! That’s a bold claim. What do they base it on?
Well, first they reference Fannie Mae as stating that prices are too high by 15%. Yet, Fannie Mae makes no such projection. In fact, the opposite, Fannie Mae projects increasing housing prices through 2023, although at a slower price, see below:
Then they go on to quote a poll done by Consumer Affairs. So, really, the article is a result of those people misled by their false reporting. And while those 5 cities may see declines in activity and declines in list prices, it certainly does not yet constitute a “crash.”
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Bill Gross, The LAProbate Expert
I am a real estate broker in Los Angeles, CA focused on probate real estate and the leader of a team of over 1,100 agents nationally probate experts.
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