The ‘R’-Word Has People Panic Stricken!

By Ron Upshaw
Licensed Broker
National Association of Realtors
Windermere | Lakeview

Matthew Gardner & Ron Upshaw

I’ve been seeing the word “Recession” a lot in the news and I have several people ask me about it in terms of buying or selling a house. So I took the opportunity to call up Matthew Gardner, the Chief Economist for Windermere. Side note: Windermere is the only Real Estate company in the region that has their own economist, so it was a nice resource to have at my disposal.

Now as a non-economist going in, I was actually more nervous about what could happen in the Pacific Northwest before I had our conversation.

 

Here’s a link to listen to our two part interview on Anchor.fm – or you can find it on all the major podcast platforms – just search for Ron and Don Radio.

• We cover the basic concepts of a recession.

• Is this the same thing as in 2008?

• What does this mean for the big tech companies like Microsoft and Amazon?

• How will this effect real estate in the PNW?

• Should you tap the brakes if you were thinking about buying a house?

• Here’s a link to Gardner’s blog if you want more info from him.

Here’s some analysis from our Windermere | Midtown marketing team.


Kianna Little
Marketing Assistant
Windermere | Midtown

Unless you are an economist, navigating the different things you hear about the economy can be difficult and knowing what types of shocks set off a recession is important so let’s keep this simple. By definition a recession is not some horrific and devastating event, it is simply an economic contraction for two consecutive quarters. This means a contraction in growth of GDP, affecting consumer spending which makes up about 70% of our economy so you can see how this would have noticeable impacts. Recessions are expected to occur about every 5 years and currently we have been in a growth period for 10 years, so it is reasonable to expect an upcoming recession.

“recession” by CreditDebitPro is licensed under CC BY 2.0

This country has overcome 47 recessions in its history, yet even just the word recession ignites fear in many. This is conceivable given the great recession we endured 10 years ago in 2008 and 2009. Though, it is important to understand that not every contractional period will be as intense as it once was before. There are different shocks that can set off a recession, in 2008 it was housing which effects a huge component of our economy. Though those wounds are still fresh, Windermere’s Chief Economist Matthew Gardner believes that this anticipated upcoming recession will be much less fierce.

Now we should focus on what the shock will be this time that sets off our next recession. In an era of social media and various platforms to utilize to help a topic blow up it is easy to see an acceleration of a subject and a bit of whipsawing that presidential tweets can stir up. Our current position with the ongoing trade war with China is a widely talked about issue that could quite likely be our next shock.

So, let’s break this down- China is patient, their first ever trade war with Russia waged for 200 years. The US on the other hand, works in 4-year increments over the election period. Situations like we are in right now come down to a matter of who is going to blink first? Gardner feels it may very likely be us. Businesses like predictability and certainty and right now, in a trade war with one of our major trading countries and working through tweets- this is something we lack.

So, what does this mean for Seattle?

In the past recessions have had an overly intense impact on Seattle, specifically the .com recession in 2001. However, Gardner highlights that this is going to merely be a general economic slow-down and Seattle won’t be overly affected by this because of its diverse employment base. There will be a decline in consumer spending at large, however Seattle has many home-based companies-Amazon for example that will make up for their loss of local sales globally.

Recession is coming. Is it still a good time to buy a home? Housing is not the driving force behind this recession and is not likely to crash this time around. If you are looking to build your wealth a great way would be investing in Seattle real estate. Believe it or not right now interest rates are low- far below what they have been in the past where we have seen interest rates as high as 20%, currently you can get an interest rate as low as 4.5%.

For Seattle specifically, the robust economy and its geographic features can support higher real estate prices. From various big home-grown companies like Starbucks, Costco and Amazon to its geological characteristics like being surrounded by water and mountains. These attributes appreciate home prices- an attractive trait for potential investors. People pay for location and Seattle has much to offer that drive up prices and continues to bring people in.

If you are debating whether now is the time for you to invest in real estate, Gardner has shared his economic standpoint on the 3 major criteria you should consider which I will share with you: 1. Are you secure in your job? 2. Are you comfortable with the debt you would be taking on and the mortgage payment? And lastly 3. Do you plan to stick around for at-least 7 years? Real estate is still the American dream and investing in it while interest rates are low could be your way of vastly securing wealth.

 

You can reach out to Ron directly at ron@windermere.com

Posted on September 18, 2019 at 4:35 am
Ron Upshaw | Category: Affordable Housing, Economy, Investing, Real Estate, Seattle, Technology

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