Looks like we should have smooth sailing in 2020, but the National Association of Business economists (NABE), the premier professional association for business economists counting Alan Greenspan as their past president, just released their business outlook predictions 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? Why did the predicted start of the next recession change?


Details of the recent NABE survey:

The National Association of Business Economics surveys members quarterly regarding their opinion on various economic conditions.  One of the notable questions is when the next recession will occur.  It is interesting to compare last August with December to see the shift in perception of the economy.

“The panel is split regarding when the next recession will begin,” added Survey Chair Eugenio Aleman, economist, Wells Fargo Bank. “Respondents believe the odds that GDP will first turn downward by mid-2020 are about one out of five, but indicate there is a one-third chance that the downturn will not begin until the second half of 2021 or later.

“Seventy-one percent of panelists believe that the balance of risks is to the downside,” continued Aleman. ”Panelists consider trade policy to be both the greatest downside and upside risk to the U.S. economy through 2020. Consumer prices are expected to increase 1.8% in 2019 and 2.0% in 2020, less than in 2018. Furthermore, panelists expect the Federal Reserve to keep interest rates unchanged in 2020.”

The odds of a recession occurring through the first half of 2020 remain generally low. Panelists put the odds of a recession starting in the second half of 2019 at 5%, rising to 21% by the first half of 2020 and 43% by the end of next year. Respondents put the odds of a recession starting by mid-2021 at 66%. The odds of a recession beginning after mid-2021are 34%.

Why have recession odds changed?

It appears that any recession will likely occur later than originally anticipated.  Economic numbers including jobs data, retail sales, etc.. have remained stronger than expected and the economic stimulus and rapid easing by the Federal Reserve has prolonged this economic cycle.

Predicting exactly when a recession will occur is almost impossible as hundreds of variables could impact the starting of a recession from trade to various shocks to the economy.  Eventually an economic cycle will happen, but exactly when is difficult to predict. The NABE economists are probably in the right range of sometime mid next year to early 2021 as growth is starting to slow.

What does this mean for real estate?

Regardless of when the next recession will occur, real estate is already starting to feel the impact.  With all the good news coming out of the economy one would expect real estate sales and prices to continue the upward trajectory.  But something unexpected is happening in most real estate markets. Prices are flat and transactions are down.  The real estate market is telling us something quite different than what economics predict should happen.  Consumers, for whatever reason, are beginning to pull back from major purchases like homes.  This trend looks to continue for 2020.

Are we at a real estate peak?

I think most markets are either at their peak or already past their peak. There is no economic impetus that would drive real estate markets much higher during this cycle. Rates are already low and the stock market is at a record high, while the unemployment rate is at historic lows.  At the same time inflation remains tame leading to historically low mortgage rates that look to stay low.  There isn’t much better than this economically speaking.     With the next cycle on the horizon, there are only two options left: 1) the market flattens 2) the market declines.

Are you ready?

Regardless of when the next recession starts, the mere talk of a recession should grab your attention. Anyone invested in real estate knows from the last cycle that when the recession occurs, cash becomes tight as tenants (residential and commercial) could have issues. Now is the time to ensure you have ample liquidity to ride out any market gyrations.


Although it is impossible to predict the exact timing of the next recession, several signals are pointing to a start sometime in the next 18 months.  Regardless of when it starts real estate is already feeling the impacts as sales soften and prices flatten.  Now is the time to make sure you are prepared for the next cycle with ample liquidity.

Additional Reading/Resources

  1. https://www.nabe.com/NABE/Surveys/Outlook_Surveys/December_2019_Outlook_Survey_Summary.aspx
  2. https://abcnews.go.com/Politics/economists-predict-us-recession-2021/story?id=65051564&cid=clicksource_77_null_bsq_hed
  3. https://www.nabe.com/NABE/Surveys/Business_Conditions_Survey/NABE/Surveys/Surveys.aspx
  4. https://www.dropbox.com/s/t3jmqd1i8ulrixp/NABE_Economic_Policy_Survey_August_2019.pdf?dl=0


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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors MagazineThe Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.


Fairview is a hard money lender specializing in private money loans / non-bank real estate loans in Georgia, Colorado, Illinois, and Florida. They are recognized in the industry as the leader in hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide.  To get started on a loan all we need is our simple one page application (no upfront fees or other games).