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Old Today, 07:42 AM
 
7,996 posts, read 11,738,037 times
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If there is a recession coming, this one won't be real estate based right? But the existing home market may see a cooling. Ok.
But what about single residential building? Does the lending get tighter? Does it get more expensive or less expensive? Seems like it would take what it takes for a builder to build but I don't know.
I'm assuming the decision to build needs a different financial bit of number crunching......for example 'have to stay in the house x number more years than before to recapture expenses.

?
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Old Today, 08:23 AM
 
Location: Florida/Tennessee
2,867 posts, read 4,395,389 times
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Recessions.... it's always a matter of when, not if. Slowdowns vs recessions. Slow down = Market Down 10% ... recession = market down 20%... never in absolute terms.

new Home sales are down, new home permits are up. However, a permit does not mean "building" homes. Home depot doing well.... 3-4% increase expected in 2019. It's a forecast but doing well now. What does this all means? Cloudy crystal balls never give accurate predictions. However if employment remains strong, consumers keep spending money, interest rates drop... that alone is a field ready for harvest.

I never thought of (in my heart) a home as a monetized product. Houses, yes.... in the short term, you buy a house in order to stop your rental dollars evaporating, hoping for some return on your equity/mortgage dollars, as you move on or move up. Keep in mind, the average house doesn't increase in value... the land does. It a truth to say at some point, most houses get bulldozed for the land. You've heard location , location, location.... well.
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Old Today, 10:20 AM
 
Location: Raleigh NC
9,729 posts, read 7,364,217 times
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Quote:
Originally Posted by Giesela View Post
If there is a recession coming, this one won't be real estate based right? But the existing home market may see a cooling. Ok.
But what about single residential building? Does the lending get tighter? Does it get more expensive or less expensive? Seems like it would take what it takes for a builder to build but I don't know.
I'm assuming the decision to build needs a different financial bit of number crunching......for example 'have to stay in the house x number more years than before to recapture expenses.

?
until 2007, recessions weren't typically tied to real estate - there might be a minimal or no effect on real estate.

And "all real estate is local". The 2007 recession didn't hit my area or the real estate truly negatively until the credit markets froze in 9/08. We dipped about 10% and then lower price ranges recovered quickly. Over $500K went down an avg of 20% and took longer to recover - like 2013.

Recession is a natural part of the economic cycle. A recession of 2 consecutive periods of economic contraction - negative GDP "growth" (not slower growth, contraction)

Depending on how affected an area is by recession - which affects different areas differently - the builders will lower the cost and price of what they're building. They're paying interest all along for their costs, so their interest at that point is in getting things sold, not trying to maximize profit.

As to an individual - if any "recession" doesn't affect you - your job remains stable - then there's essentially no calculation about staying in the house more years, etc. You just stay there and enjoy a new construction.
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Old Today, 10:23 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
30,217 posts, read 55,074,459 times
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I can tell you what happened in our area in the last one. A new development of 100+ condos stopped with only a few built and a dozen or so more mid-framing. That company went out of business. Eventually about 5 years later the bank sold the whole thing and they got finished, and sold for the 500k and up each. They are now worth $700k. Other developments went on hold.



Also, our city laid off 12 people. They still had plenty of money to pay people, but the building permit and inspection people had nothing to do so had to go.
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Old Today, 10:54 AM
 
Location: Salem, OR
14,062 posts, read 33,133,167 times
Reputation: 12948
Quote:
Originally Posted by Giesela View Post
If there is a recession coming, this one won't be real estate based right? But the existing home market may see a cooling. Ok.
But what about single residential building? Does the lending get tighter? Does it get more expensive or less expensive? Seems like it would take what it takes for a builder to build but I don't know.
I'm assuming the decision to build needs a different financial bit of number crunching......for example 'have to stay in the house x number more years than before to recapture expenses.

?
What happens depends on the recession. Recessions are part of a normal economic cycle so it just depends on the severity of the recession.

Building slows down as builders have carrying costs. So what you generally see are fewer spec builds. They still build, but they tend to want to have a buyer in place so they are holding less vacant stock.

Generally, it gets less expensive to build because of labor costs, but it costs more to hold the property and pay interest while you have to wait for it to sell. Generally, new construction prices drop during a recession. During a recession, subcontractors often have to be more competitive to get jobs, since there are fewer of them, so they will cut their labor costs.
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