Monetary policy is the likeliest cause of the next recession, according to a Zillow survey of economists and housing experts
SEATTLE, May 22, 2018 /PRNewswire/ -- The United States will likely enter the next recession in 2020, according to the 2018 Q2 Zillow® Home Price Expectations Surveyi.
The quarterly survey, sponsored by Zillow and conducted by Pulsenomics LLC, asked more than 100 real estate experts and economists about their predictions for the housing market, including when the next recession would begin and what could trigger it.
Overall, nearly half of all the experts surveyed expect the next recession to begin sometime in 2020, with Q1 being the most commonly selected quarter. More than half of the survey respondents pointed to monetary policy as the likeliest cause.
The current economic expansion is the second longest in American history, and will be the longest ever recorded if the panelists' predictions hold true. The housing market collapse led to the Great Recession, but few experts – just nine of the respondents – think the housing market will be at the center of the next downturn.
The Federal Reserve's decisions about U.S. monetary policy will be the main factor in the next recession, according to the surveyed experts. By most measures, the economy is doing well – GDP is growing steadily, and unemployment is near historic lows. This has prompted the Federal Reserve to raise short-term interest rates four times since the start of 2017, with two more rate hikes expected this year. There are roughly even odds for a third hike before the end of 2018, but raising rates too quickly could push the economy toward slower growth, leading toward a recession.
"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," said Zillow senior economist Aaron Terrazas. "Housing affordability is a critical issue in nearly every market across the country, and while much remains unknown about the precise path of the U.S. economy in the years ahead, another housing market crisis is unlikely to be a central protagonist in the next nationwide downturn."
Less than a year ago, panelists in this survey named geopolitical crisis as the most prominent likely cause of the next recessionii. Those concerns have fallen below policy-related fears like trade policy, a correction in the stock market or an unexpectedly high inflation rate.
In the meantime, experts think the housing market will continue to experience strong appreciation. They predict U.S. home values will rise 5.5 percent in 2018 to a median of $220,800. At this time last year, predictions were for home values to rise 3.7 percent in 2018.
"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," said Pulsenomics founder, Terry Loebs. "These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers."
Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with great real estate professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow Group's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
Pulsenomics LLC (www.pulsenomics.com) is an independent research and consulting firm that specializes in data analytics, new product and index development for institutional clients in the financial and real estate arenas. Pulsenomics also designs and manages expert surveys and consumer polls to identify trends and expectations that are relevant to effective business management and monitoring economic health. Pulsenomics LLC is the author of The Home Price Expectations Survey™, The U.S. Housing Confidence Survey, and The U.S. Housing Confidence Index. Pulsenomics®, The Housing Confidence Index™, and The Housing Confidence Survey™ are trademarks of Pulsenomics LLC.
i This edition of the Zillow Home Price Expectations Survey surveyed 105 experts between April 26, 2018 and May 10, 2018. The survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc.