Recession Could Hit by Late 2019, Experts Say
- On average, real estate economists and experts say there’s a 52 percent probability of next recession starting by the end of 2019.
- Most experts expect a geopolitical crisis will trigger the next recession, which a majority believe will have only a moderate impact on U.S. housing.
- Home values will climb 5.08 percent by the end of 2017, the group said.
Home values continue to climb, passing $200,000 in June for the first time ever. A panel of more than 100 real estate economists and experts expect that trend will continue – while they say, on average, that there’s a 52 percent probability of the next recession starting by the end of 2019.
The probability jumps to 73 percent for a recession starting by the end of 2020, according to the Q3 2017 Zillow Home Price Expectations Survey (ZHPE), a quarterly survey sponsored by Zillow and conducted by Pulsenomics LLC. The latest survey was conducted in late July and early August.
Most of the panel’s experts (67) think a geopolitical crisis is likely to be a major trigger for the next recession. That would be a rare occurrence. Although the terrorist attacks of Sept. 11, 2001, prolonged a recession, most sustained downturns – including that one – have not started with a geopolitical crisis.
The panel ranked likely triggers as 1, 2 and 3 – and with that weighting, a geopolitical crisis also came out ahead, with a score of 138. It was higher than a score of 111 for monetary policy, 101 for a stock market correction and 55 for political gridlock as other possible recession triggers.
On average, the group expects the next recession to have only a moderate impact on U.S. housing. The group said San Francisco and Miami would be the most affected, followed by Los Angeles, New York, San Diego and Seattle.
The average expected annual growth rate for the five years January 2017 through December 2021 is 3.4 percent, with optimists predicting 5.2 percent average annual growth during those five years and pessimists predicting 1.3 percent.
If the average prediction for 2017 holds true, home values in December would be $204,060 – still below what experts say the average home value would have been at that time if the last recession had never happened ($214,506).
Expectations for the year continue to rise with each quarterly survey, a result of a hot housing market that continues to be driven by low inventory. A year ago, panelists said they expected 2017 home values to grow by 3.6 percent.
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