Why the Economy Won't Tank the Housing Market

In recent years, the looming possibility of a recession has been a topic of concern for many. Recession talks have been circulating, and with them, worries of rising unemployment rates and a potential wave of foreclosures, akin to what occurred 15 years ago. However, the latest Economic Forecasting Survey from the Wall Street Journal (WSJ) brings some optimism. It reveals that, for the first time in over a year, less than half (48%) of economists believe a recession will actually occur within the next year.

A Shift in Economic Outlook

Economists are cautiously turning optimistic about the U.S. economy. They've lowered the probability of a recession within the next year from an average of 54% in July to a more hopeful 48%. This marks the first time they've placed the probability below 50% since the middle of the previous year.

Unemployment Projections

The crucial question here is whether the experts anticipate a significant surge in the unemployment rate. Recent projections based on the same WSJ survey shed light on what economists foresee for the unemployment rate over the next three years.

These projections indicate that while some job losses are expected, they are not anticipated to reach levels that would severely impact the job market. However, it's essential to consider the potential impact on individuals and families who may face unemployment, as job losses can be devastating on a personal level.

Historical Perspective on Unemployment and Housing

To evaluate the housing market's vulnerability, it's crucial to look at historical unemployment data. A comparison of historical data from Macrotrends and the Bureau of Labor Statistics (BLS) reveals a reassuring trend.

As seen in the graph, the average unemployment rate dating back to 1948 is 5.7%. The last housing market crash occurred in the immediate aftermath of the 2008 financial crisis when the average unemployment rate soared to 8.3%. Both of these historical averages significantly surpass the current unemployment rate (as shown in the blue bar).

Future Projections and Housing Market Impact

Projections indicate that the unemployment rate is likely to remain below the 75-year average in the foreseeable future. Consequently, experts do not foresee a wave of foreclosures that would severely disrupt the housing market.

The prevailing sentiment among economists is that a recession is becoming less likely in the next 12 months. This sentiment is mirrored by their expectation that the unemployment rate will not dramatically surge, which means the likelihood of a wave of foreclosures leading to another housing market crash is low. However, it's crucial to remain vigilant and keep an eye on economic developments. If you have questions or concerns about unemployment and its potential impact on the housing market, don't hesitate to reach out for more information.