Housing, Economics and Growth in a Post-Recession America

A 121-Month Lookback at the Longest Economic Expansion in U.S. History

By Frank Nothaft Housing Affordability, Mortgage Finance

In July 2019, the U.S. economy reached a historical marker - it’s 121st consecutive month of growth. The current economic expansion, which began in June 2009 after the Great Recession ended, is now the longest in American history. The economy has grown rapidly over the past decade, with housing comprising nearly 15% of gross domestic product (GDP) since 2010. Housing trends such as rising home prices and rents, increased housing flip rates and fewer homes with negative equity are all strong indicators of a healthy U.S. economy.

In this CoreLogic special report, we take a retrospective look at the evolution of the housing sector between June 2009 and July 2019 and explore what this expansion means for the future of the economy.

GROWTH CONTRIBUTORS: ECONOMICS AND POLICIES

First, it’s critical to keep the severity of the Great Recession in mind when evaluating the expansion. In what was the worst and longest-lasting financial crisis in the United States since the Great Depression, the recession provided such a low trough point that the economy could only go one direction. Numerous factors, both economic and cultural, contributed to the current expansion’s longevity.

Unemployment

The labor market holds substantial power over the country’s economic outlook, and changes in unemployment often reflect that of economic growth. U.S. unemployment, which peaked in October 2009 at 10%, dropped to a 50-year low in May 2019 to 3.6%, and June 2019 marked the 16th consecutive month where the unemployment rate was at or below 4%. In the past decade, the largest drop in unemployment occurred when the average annual unemployment rate decreased 1.2 percentage points (from 7.4% to 6.2%) between 2013 and 2014.

Monthly Unemployment Rate

GDP

Steady GDP growth is also indicative of a healthy economy. Since 2010, GDP has maintained solid annual growth, ranging from 1.6% to 2.9%, the latter marking the largest increase during this period. In both 2015 and 2018, the GDP experienced a 2.9% increase due to increased consumption spending and support from the Tax Cuts and Jobs Act, respectively.

GDP Growth Rate

Culture

A handful of societal factors have also contributed to both the expansion and the housing market’s evolution. From a new generation of DIYers catapulting networks like HGTV to record-high ratings to the rise of minimal living and tiny houses, consumer preferences have reshaped housing and real estate. Additionally, the democratization of technology over the past decade has helped to buoy (and propel) the housing market. As much as 35% of homebuyers bid on a home before seeing it in person due to the convenience technology affords, as well as growing reliance on online information.

Housing Post-Recession

Following the recession, several aspects of the housing economy were affected. There was an overall loss in home value, which led to an influx of previous homeowners to the rental market and a correlation with a drop in negative equity share. Unsurprisingly, many first-time buyers were cautious after the recession, choosing to rent for longer and delay homeownership.

THE ROAD AHEAD: ANOTHER RECESSION ON THE HORIZON?

Despite measures put in place in hopes of thwarting the issues that caused the last recession (stronger capital requirements at financial institutions and additional consumer protections), as well as record-low unemployment and sturdy GDP, there are some hints of another possible recession.

  • Ten-Year Treasury Yield dropped from 3.2% in November 2018 to about 2% in June 2019, indicating the bond market may fear a slowdown
  • Two stock market corrections (when the market drops at least 10% from a recent high) within the past 15 months
  • Slowing home-price growth, dropping to 3.6% in May 2019 from 4.1% in January 2019

Some experts are also weighing in with their predictions. In an economic forecasting survey conducted by the Wall Street Journal, 49% of respondents expect a recession to occur in 2020, while 36.6% say one will occur the following year. In a similar vein, the NABE Outlook Survey forecasts GDP growth to slow from 2.9% in 2018 to 2.4% in 2019, and eventually, to 2% in 2020. Still, most signs point to a positive economic outcome. 

The 2019 CoreLogic Special Report explores these potential recession indicators and looks at how the housing market would fare during the next economic dip. Overall, the long view of the U.S. economy looks healthy, and the CoreLogic Home Price Index Forecast predicts a moderate, 5.6% acceleration in annual home price growth from June 2019 to June 2020.

To read more, download the report, The Role of Housing in the Longest Economic Expansion (June 2009 – July 2019 and Counting).

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