Historical Real Estate Performance Before, During, and After U.S. Recessions
November 8, 2022 | Edward Pierzak | Nareit
After experiencing two consecutive quarters of negative growth in the first half of 2022, U.S. real GDP grew by 2.6% in the third quarter this year. Total nonfarm payrolls increased by 261,000 in October; monthly gains have averaged 407,000 jobs thus far in 2022. Implementing its fourth consecutive 75 basis points rate increase, the Federal Open Market Committee set the target range for the federal funds rate at 3.75% to 4.00% this month. As of October 2022, the Bloomberg consensus forecast survey placed the odds of a U.S. recession within the next 12 months at 60%; the likelihood was 50% in the prior month. With mixed economic growth results, waning job gains, increasing interest rates, and rising recession risk, the U.S. economy is in a precarious state.
Economic growth is a key driver of real estate operational and investment performance. With this in mind, some property investors are increasingly concerned about downside risk. They want to know how real estate may fare in a recession. While past performance may not be indicative of future results, a review of historical public and private real estate total returns before, during, and after recessions can be instructive for property investors, and may alleviate some concerns.
