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The Median Home Price May Continue to Increase During the Next Recession

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Real Estate Cycle

Since 1980, there have been 5 recessions in the United States. The median home price in Florida actually increased in 4 of the 5 recessions.

A recession is defined by the National Bureau of Economic Research (NBER) as, “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

The recession dates and lengths are shown in the chart below:

Below, I have analyzed the impact on the median home prices during the last 5 recessions. However, the Federal Reserve data for the MSAs in Southwest Florida is only available for the last 3 recessions.

During the last 5 recessions, the State of Florida’s median home price only decreased during The Great Recession and increased an average of 7.09% in the remaining 4 recessions. The Southwest Florida MSAs have also experienced a similar pattern with only a decrease during the most recent recession.

Although The Great Recession officially ended in 2009, the median home prices in Southwest Florida and the overall state continued to decline. Below is a chart illustrating the total decline from peak to trough, which typically ranged from 2007 to 2011.

We will eventually reach another recession; however, median home prices may not decrease, as indicated in 4 of the 5 previous recessions. The cause of the next recession may be a combination of many issues and a well written market analysis may be able to forecast future declines in your submarket, based on market fundamentals.

Thank you for reading my article.

Byron Torres, MAI

Please email any inquires to byron.torres@cap-val.com

-Edited by Raishrie Bahoran, LCSW

References

U.S. Federal Housing Finance Agency, All-Transactions House Price Index for Florida [FLSTHPI], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/FLSTHPI, February 16, 2019.

U.S. Federal Housing Finance Agency, All-Transactions House Price Index for North Port-Sarasota-Bradenton, FL (MSA) [ATNHPIUS35840Q], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ATNHPIUS35840Q, February 16, 2019.

U.S. Federal Housing Finance Agency, All-Transactions House Price Index for Naples-Immokalee-Marco Island, FL (MSA) [ATNHPIUS34940Q], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ATNHPIUS34940Q, February 16, 2019.

U.S. Federal Housing Finance Agency, All-Transactions House Price Index for Cape Coral-Fort Myers, FL (MSA) [ATNHPIUS15980Q], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ATNHPIUS15980Q, February 16, 2019.

U.S. Federal Housing Finance Agency, All-Transactions House Price Index for Punta Gorda, FL (MSA) [ATNHPIUS39460Q], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ATNHPIUS39460Q, February 16, 2019.

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