The term “recession” is misunderstood by almost everyone I chat with. And consciously or not, it’s impacting a lot of behaviour in the marketplace. There are technical definitions of what a recession is, but that’s for another day. What I want to touch on is how it impact what people are projecting the housing market to do. I chat with buyers daily. And I phrase I keep hearing is that most are “waiting for the market to keep coming down”.
I realize the main reason they say is hope. There’s a hope and a wish that the type of home they’re looking for with continue to drop in price until it reaches a range, they’re happy with. Funny thing about this is that, if you ask just about anyone, they’ll acknowledge this but are unable to tell you what that number is! Or they’re hoping prices continue to drop so much that what they really want (for instance; a detached house instead of a row home).
The second reason they might say this, and this one is funny to me, is that they truly believe they are outsmarting the entire market. When someone tells me they’re waiting to time the market till it reaches its bottom, I always try to politely point out that they probably didn’t time it well the last time (very few did, and most were lucky). They also probably didn’t time the peak (last March) perfectly. And the funny thing is, there are THOUSANDS of people all believing they’re going to time this ‘next’ bottom in the market perfectly. The irony is that when thousands of purchasers all decide while the market has reached that bottom, prices will likely already be going up due to competition between a high number of buyers for limited listing inventory. Sound familiar?
…A small thought for those who are REALLY hoping prices continue to fall drastically. You should only be hoping for this if you are in a completely recession-proof industry or are an investor with the cash to expand while still being able ride-out dry seasons. The market has already dropped 20%-30%, depending on location and property type. And for it to continue to drop at that rate would only be cause by economic issues, rises in employment and business closures that would impact most buyers in ways far more seriously than how good of a deal they can find on property.
The third reason is people don’t realize what happened last time we had a recession. Prices didn’t drop for three years or five years. They dropped for about a year, and then rose by healthy, steady amounts for the next 6 years in line with the economy’s growth. We’re already coming up on 1 year since the market turned downward and, although I expect they’ll drop for most of 2023 still, I personally believe prices have already done most of their movement.
Beware of Agents Who Are Saying “The Market’s Back”