At first glance, 2020 looked like smooth sailing. But the National Association of Business Economists (NABE)—a respected body whose past presidents include Alan Greenspan—recently released their latest economic outlook, placing the odds of a recession in the next 18 months at 66%.
What does this mean for the real estate market? Are we at a peak? And why has the predicted start of the next recession been pushed back?
Key Takeaways from the NABE Survey
The NABE surveys members quarterly to gauge expectations on various economic conditions. A particularly notable question centers on when the next recession will begin. Comparing results from August to December reveals a shift in perception among top economists.
“The panel is split regarding when the next recession will begin,” said survey chair Eugenio Aleman of Wells Fargo. “There’s a one-in-five chance GDP will turn negative by mid-2020, and a one-third chance that the downturn won’t start until the second half of 2021 or beyond.”
According to the survey:
- 71% believe the economic risks are tilted to the downside
- Trade policy is seen as the greatest source of both upside and downside risk
- Consumer prices are expected to rise 1.8% in 2019 and 2.0% in 2020
- The Federal Reserve is expected to hold rates steady throughout 2020
Most notably: economists now place the odds of a recession by mid-2021 at 66%.
Why Have Recession Predictions Shifted?
While a downturn is still expected, the timeline has changed. Stronger-than-expected economic indicators—such as job growth and retail sales—combined with aggressive Federal Reserve stimulus have extended the current cycle.
Still, predicting the exact timing of a recession remains nearly impossible. It could be triggered by trade disruptions, geopolitical tensions, or unforeseen economic shocks. NABE’s projection of mid-to-late 2021 seems reasonable given current trends.
What Does This Mean for Real Estate?
Even before the next recession officially begins, real estate markets are feeling the effects. Despite economic optimism, home sales are down and prices have flattened across many markets. Buyers are pulling back—signaling caution despite low rates and a strong stock market.
Are We at a Real Estate Peak?
In many markets, yes. We may have already passed the peak or are right at it. With low rates, record-high equities, and stable inflation, there’s little room for further economic stimulus. As the next economic cycle approaches, two paths remain: the market flattens—or it declines.
Are You Prepared?
Whether or not the recession arrives in 2020, even the talk of a slowdown should prompt action. For real estate investors, this means ensuring ample liquidity. In a downturn, cash is king. Residential and commercial tenants may struggle, and access to capital could tighten.
Summary
While no one can predict the exact timing of the next recession, economists agree it’s on the horizon. Real estate markets are already showing early signs, with slowing sales and price stagnation. The time to prepare is now—before the lion shows its teeth.
Additional Reading/Resources
- NABE Outlook Survey Summary
- ABC News: Economists Predict U.S. Recession
- NABE Business Conditions Survey
- NABE August 2019 Policy Survey (PDF)
I Need Your Help!
Don’t worry, I’m not asking you to wire money to a long-lost cousin! But I would truly appreciate your support in sharing these insights on LinkedIn, Twitter, Facebook, or any other platform. Every share helps.
Written by Glen Weinberg, COO/VP of Fairview Commercial Lending. Glen has been featured as an expert in hard money lending and real estate valuation by Bloomberg, Businessweek, Colorado Real Estate Journal, NAR Magazine, The Real Deal, and many others.
Fairview is a hard money lender specializing in private, non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. We fund our own loans, charge no upfront fees, and offer honest answers fast. Start with our simple one-page application.
