Here at first tuesday, we have long been sounding the alarm about an oncoming recession. When last asked about the timing of that recession, respondents overwhelmingly agreed it was likely to take place in 2020 or 2021.

Heading into 2020, however, readers are split on the question of whether we are currently in the throes of an economic downturn; 46% believe California’s economic decline is already upon us. While a majority of respondents maintain a sunny disposition about the state’s economic prospects, the question is worth asking: Are we currently on our way toward a recession?

Recession forecast

Simply put, the answer is yes.

The most time-tested tool we have at our disposal when it comes to forecasting a recession is the yield spread. The yield spread is the difference between:

  • the 10-year Treasury Note rate — representing bond market confidence in the economy; and
  • the short-term borrowing rate — representing the Federal Reserve’s (the Fed’s) actions to shrink or grow the economy.

The yield spread indicates the likelihood of a recession one year forward. As the yield spread approaches zero, the likelihood of a recession rises. Whenever the figure dips below zero — or inverts — a recession is almost certain to occur in the next 12 months.

The last time the yield curve inverted was mid-2019, meaning a recession is expected to hit in the latter half of this year.

Additionally, we’re beginning to see the housing market reflect the current downturn. California home prices flattened out last year after a years-long incline, signaling an imminent downward shift. Sales volume, too, remained low, and is not expected to bounce back until after the coming recession.

All economic signs currently point in a downward direction — so what happens next?

Related article:

Stay ahead of the next recession

Recession-minded strategies

The good news is that the next recession is not likely to equal the severity of the Great Recession. While recessions come with decreased demand for new homes, California’s housing shortage means demand is already high, allowing the state’s housing market to weather those effects, at least to some degree.

However, keep in mind that when home prices fall, even when the decline isn’t drastic, so does an agent’s income, pushing them toward either eating into their savings or stepping up production.

Increasing production means extra transactions, focusing on higher-priced homes or earning supplemental income through activities like relocations or property management.

One of the most helpful ways to make sure you have the clientele to get you through a recession is to market more aggressively, including:

  • expanding your FARM to additional neighborhoods and demographics;
  • increasing the frequency with which you deliver marketing materials; and
  • advertising your real estate website — or building one if you don’t already have one.

Widening your reach to new clients is essential, as it will supplement your income and allow you to maintain your current standard of living even when the economy takes a dive.

Additionally, becoming a broker may put you in a position to weather the storm of the recession by attaining a better fee split as a broker-associate or launching an independent brokerage.

Recessions are tough on everyone, but taking concrete steps to prepare is crucial when you want to stay ahead of the game.