A Note from Windermere Chief Economist

A couple of weeks ago, I was interviewed by the Puget Sound Business Journal at their Eastside Commercial Forum in Bellevue. During this interview, I made a statement regarding the potential for a recession to start in 2019, which was published in an article entitled “Windermere chief economist sees a Seattle recession on the horizon.” This article appears to have caused a certain amount of angst amongst some of our owners and agents, so I would like to take this opportunity to clarify my comments.

Those of you who have listened to me speak at any one of a number of Windermere events in recent months, have undoubtedly heard me say that we are due for a recession in the next couple of years, and my belief has not wavered.

The US economy is currently in expansion mode, but as is true with any period of economic growth, this cannot continue forever. Every period of growth inevitably ends in a recession and the current one will be no exception; however, what I do believe will be different is that it will look nothing like the “Great Recession” of 2007-2009.

In fact, my current model suggests that it is likely to be a relatively mild period of contraction (similar to the recession of the early 1990’s), and most importantly, it will not be driven by housing. When it comes to the housing market, I believe that if the unemployment rate during the upcoming recession does not rise above 7 percent, we will see virtually no negative impact on US housing prices.

As you may have heard me say, “recessions happen,” and they do.

The average US economic expansion lasts for about 65 months and we are currently 42 months into the current period of growth. Given the 65-month average, we have until April of 2019 before we would expect to see the start of a period of slowing.

I’m not going to get into the details about why recessions happen, but I stand by my belief that there will be a fairly modest slowdown, as there has been 49 times before in US history. As far as timing is concerned, I predict that it will start in early 2019, but it could be a little earlier or a little later. In fact, my colleagues at Fannie Mae & Freddie Mac are even giving odds on a recession starting in the next 12 months. But, personally, I do not agree with that position.

When OB, Jill, and Geoff expressed interest in hiring me nearly three years ago, I made one thing clear to them: my sole goal is to provide them and our owners/agents with economic analysis for the advancement of their own businesses – whether the news is good or bad.

My advice to all of you is quite simple: enjoy today’s market! But remember that every good thing cannot continue forever. Keep your “powder dry” and know that even if my timing is off a little, we will eventually see a slowdown. The good news is that for now it is extremely unlikely that the housing market will see any major fallout.

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