Why the Economy Won’t Tank the Kansas City Housing Market

Are you worried about a future recession? You’re not alone. Recent years have generated plenty of recession talk among Kansas City home buyers and sellers. If a recession occurs, many people are concerned it would cause the unemployment rate to skyrocket. Some KC homeowners fear that a spike in unemployment would lead to a rash of foreclosures comparable to 15 years ago.

However, the latest Economic Forecasting Survey from the Wall Street Journal (WSJ) reveals that this is not likely to happen. For the first time in over a year, less than half (48%) of economists predict a recession will take place within the next year:

Economists are turning optimistic on the U.S. economy . . . economists lowered the probability of a recession within the next year, from 54% on average in July to a more optimistic 48%. That is the first time they have put the probability below 50% since the middle of last year.”

Since more than half of these experts no longer expect an imminent recession, it’s natural to assume that they similarly don’t expect the unemployment rate to jump. This conclusion is correct. To show precisely what these economists forecast for the unemployment rate over the next three years, the graph below analyzes data from that same WSJ survey (see graph below):

 

If housing market experts’ projections prove accurate, more people will lose their jobs in the upcoming year. Job losses are devastating no matter the circumstance, affecting both the employee and their loved ones. In this prediction of increased unemployment, there is one central question: Will the number of job losses be enough to cause a wave of foreclosures and crash the Kansas City housing market? Based on historical context from Macrotrends and the Bureau of Labor Statistics (BLS), the answer is no. The current unemployment rate is recording near all-time lows (see graph below):

 

The orange bar in the graph indicates that the average unemployment rate dating back to 1948 is 5.7%. The red bar shows that the last time the housing market crashed, in the immediate aftermath of the 2008 financial crisis, the average unemployment rate had risen to 8.3%. These two bars are considerably more elevated than today’s unemployment rate (shown in the blue bar).

Projections show that the future unemployment rate will likely stay below the 75-year average. These lower numbers mean home buyers and sellers don’t need to fear a wave of foreclosures that would severely impact the Kansas City housing market.

Bottom Line

More than half of current housing market experts no longer expect a recession to occur within the next year. Consequently, they also don’t expect a dramatic rise in the Kansas City unemployment rate that would lead to numerous foreclosures and another housing market crash. Do you have questions about unemployment and its impact on the Kansas City housing market? The Just Say Home Team thoroughly understands the current KC market and can help you gain peace in your decisions moving forward!

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