Hi, this is Steve Bray today's Lone Star Lending
Star Bits.
Some pundits have suggested we're staring
at the beginnings of a new recession fueled
by the housing market.
Not so, says Ralph DeFranco, Global Chief
Economist for Arch Capital Services.
He says current housing trends bare no resemblance
to conditions that existed prior to the Great
Recession.
A recession is inevitable at some point in
the future, but DeFranco says it should be
less severe for the housing market than the
2008 recession due to three factors:
- He estimates the current market is underbuilt
by 1 million homes;
- Homebuyers are more cautious; and
- The quality of loans originated since the
Great Recession is much higher.
Conditions were exactly opposite before the
Great Recession.
DeFranco also noted that big price drops during
recessions are the exception rather than the
norm.
In the five recessions since 1975, home values
have declined only once.
Moreover, the current housing inventory shortage
likely would soften the effects of a recession
on the housing market.
That's Star Bits for today.
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