A recession in the US is looming, but how will it affect lead gen with likely residential real estate movers — and what has happened historically?
In the United States, a recession is typically defined as a significant decline in economic activity. It is characterized by a contraction in gross domestic product (GDP), a rise in unemployment and declining economic activity across multiple sectors of the economy.
The duration of a recession can vary widely depending on a variety of factors, “including the severity of the underlying economic shocks and the effectiveness of policy responses aimed at stabilizing the economy,” according to the National Bureau of Economic Research (NBER).
Historically, the duration of recessions in the US has ranged from a few months to several years. But, according to data from NBER, the average duration of a recession in the US since World War II has been around 11 months, ranging from six months to 18 months.
How ought you to alter your business to reflect that potential timeline?
Causation vs. correlation
There is a direct correlation between recessions and people moving. During recessions, people may move for various reasons, such as job loss, financial hardship, or a need to downsize or cut expenses.
Historically, during a recession, job losses and economic insecurity can make it difficult for people to afford their homes, leading to foreclosures, evictions, and a rise in homelessness. This can result in higher rates of residential mobility as people search for more affordable housing options or move in with family and friends. However, in many markets through the US, a massive amount of wealth has been generated as home prices skyrocketed over the past two years, so this factor may not be as significant this time.
Moreover, economic downturns can also lead to changes in migration patterns, with people moving away from areas that are hard hit by the recession in search of better economic opportunities elsewhere. For example, during the 2008 to 2009 recession, a significant outmigration from states hit hard by the housing market collapse occurred, such as Florida, Arizona and Nevada.
Overall, while there is a correlation between recessions and people moving, the relationship between the two is complex and not simple to predict as these are unprecedented times.
How will we know the recession is official?
NBER is the organization responsible for officially dating business cycles and determining whether the US economy is in a recession. NBER typically considers a variety of economic indicators, including GDP, employment, industrial production and income, among others, to determine the start and end dates of a recession. The organization considers both the depth and duration of the economic decline and the impact on multiple sectors of the economy.
NBER does not use residential real estate data to make the calculation. However, the real estate market can be an important factor in economic cycles, and shifts in the housing market can impact the broader economy.
For example, during the 2008 to 2009 recession, the housing market’s collapse played a key role in triggering the broader economic downturn, as the decline in home values and increase in foreclosures led to a decline in consumer spending and a contraction in the financial sector.
Real estate movers and shakers
Recession or not, people will move. Frequent readers of my content know that life events cause people to move, and now more than ever, these events are the sole reason people need to move. The Data D’s — death, divorce, diapers, diamonds, diplomas (there are more) — alter life and force people to move, despite high prices or bad interest rates. Knowing this can impact your lead generation efforts.
Chris Drayer is co-founder of Revaluate which segments consumers for marketers by propensity to move.