Growing concerns about a potential US recession this year have led experts to reassure American homeowners that their properties’ values will not crash. A new report by Redfin suggests that most homeowners sitting on low mortgages and high-value properties are unlikely to be forced to sell, even in the face of an economic downturn.
According to Redfin economist Chen Zhao, the housing market is relatively insulated from a downturn due to many homeowners holding onto high levels of equity and locking down ultra-low mortgage rates. This means that even if mortgage delinquency rises, it will not necessarily spike, as homeowners are motivated to continue paying their mortgages to keep hold of their properties.
The most vulnerable homeowners are those who bought their homes recently with high prices and high rates, but even they can refinance and see their monthly payments shrink considerably. Mortgage servicers are also more ready to offer mortgage forbearance and modification instead of pursuing foreclosure in the case of delinquency.
However, renters stand to bear the brunt of an economic downturn, as lower-income individuals are more likely to lose their jobs and experience decreased demand for housing. A recession could lead to a drop in rents, but at present, rents are on the rise after months of staying flat.
Despite these reassurances, fears of a recession persist, with many experts warning that the telltale signs of an incoming recession are manifesting in financial market signals. Researchers at JPMorgan Chase project a 40 percent chance of the US entering a recession this year.
Source: https://www.newsweek.com/will-recession-spark-housing-market-crash-what-know-2043954