Recession is defined as a period of temporary economic decline during which trade and industrial activity are reduced, generally defined by a fall in GDP in two successive quarters.
Is economy of USA poised for a recession? GDP did drop in the first quarter.
The Conference Board forecasts that US Real GDP growth will rise to 2.1 percent (quarter-over-quarter, annualized rate) in Q2 2022, vs. -1.4 percent growth in Q1 2022. Annual growth in 2022 should come in at 2.3 percent (year-over-year) and we expect growth of 2.1 percent (year-over-year) in 2023. Size of US economy is $25 Trillion.This does not sound like a recession to me. Waiting on Q2 GDP number!
The institutions have sounded bells of rescission because in my opinion they do not want to be caught on the wrong foot as in 2008.
- Deutsche Bank says the U.S. will enter into a modest recession in 2023.
- Goldman Sachs economists believe the odds of a recession in the next year sit at 15%, rising to 35% over the next 24 months.
- Fannie Mae released a housing assessment updating 2023 forecast to include a modest recession, but does not expect to be similar in magnitude or duration to the recession of 2008
It seems clear that this will not be a repeat of 2008. Lender underwriting is much stricter, we have a lower supply and a higher demand for homes, and household incomes are in better shape. And, millennials are entering family-forming years in which they will want to purchase homes, further boosting the housing market.
What does this mean for investors?
Recession impacts prices in ultra luxury segment or C class properties. Focus on B class with value add. Cities have allowed ADUs and DADUs which can be rented out separately, focus on adding these, increasing cash flow and values. Diligently monitor the investment metrics such as cash flow and cash on cash return.