Why Recessions Are Good for Home Inspectors

Recessions aren't something to fear – they're opportunities to seize, especially if you're a home inspection business owner. While conventional wisdom suggests economic downturns are universally negative, historical data reveals a surprising truth: home inspection companies consistently thrive during these periods.

During both the Great Recession (2007-2009) and the COVID-19 downturn (2020), the inspection industry experienced remarkable growth while other sectors struggled. This isn't coincidental – it's a predictable pattern driven by fundamental market shifts that create ideal conditions for inspection services to flourish.

When economic pressure forces more homes onto the market, housing inventory increases dramatically. Financial hardships, job relocations, and foreclosures push properties into circulation that would otherwise remain off-market. Simultaneously, market dynamics shift in favor of buyers, making sellers more willing to invest in pre-listing inspections to attract purchasers. Recession-era buyers, naturally more cautious with their investments, rarely waive inspections and frequently walk away from properties with significant issues – creating inspection cascades where multiple inspectors evaluate the same property for different potential buyers.

The multiplier effect continues as rejected properties generate additional inspections when sellers must find new buyers, and those initial buyers move on to inspect other homes. Add in the foreclosure market, increased investor activity as prices drop, commercial property transitions, and renovation loan inspections, and you have a perfect storm of opportunity for inspection businesses that maintain operations while competitors react emotionally and exit the market.

Waiting eight to ten years between recessions might seem like a long time, but these economic cycles are inevitable. Rather than dreading the next downturn, prepare to capitalize on it. When others panic and retreat, position your inspection business to capture the expanded market share that historically appears during these periods. The evidence is clear: in the home inspection industry, recessions don't signal disaster – they herald opportunity.

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*The views and opinions expressed in this podcast, and the guests on it, do not necessarily reflect the views and opinions of Inspector Toolbelt and its associates.

Chapters

• 0:00 Introduction to Recessions and Inspections
• 7:34 Why Home Sales Increase During Recessions
• 11:21 Pre-Listings and Cautious Buyers Multiply Inspections
• 12:20 Historical Growth During Economic Downturns
• 13:36 Additional Revenue Streams During Recessions
• 17:32 Staying in the Game While Others Panic

Transcript

Ian Robertson 

Welcome back to Inspector Toolbelt Talk everyone. Today, we're going to be talking about something that seems to be on a lot of people's minds, and I know that it comes up in my news feed just about every other story, is the question, is there going to be a recession, is what everybody's thinking about. More importantly to me than asking the question, is there going to be a recession, is when will there be a recession, and how can I take advantage of it? Because in reality, recessions happen, generally speaking, loosely speaking, every eight to 10 years or so, a matter of fact, one of the longest runs that the US has ever had without a recession was in the 2010 to 2020 period. It was, actually, was more like 2009ish. It was one of the longest time periods without a recession. It's a normal part of an economic cycle, and especially in the US. But everybody's worried about, is there going to be a recession? And you know, how's that going to affect me? I don't worry about recessions. I look forward to them, especially as a home inspection company owner. So we're going to go over some reasons why a recession is good for our industry and good for you and me as individual business owners. 

Now, just to kind of lay the groundwork, we have empirical data to show that recessions are good for business. So for instance, in the last 20 years, there have been two recessions. Technically you could say three, but it was never announced. So I just want to cover one point. Everybody likes to say, whenever we mention recession, oh, well, you have to have this, or you have to have that. Here's what actually defines a recession. It's not simply two consecutive quarters of negative GDP growth. That's just a rule of thumb. I had a guy argue with me that the recession, the last recession that happened, didn't actually happen, because there wasn't two quarters of negative GDP growth. So instead, there's a range of indicators, and it has to be officially announced. So for instance, the National Bureau of Economic Research, specifically its business cycle dating committee, they're the ones who announced that we have a recession, and it's typically announced afterwards because there's not enough data at the beginning or during to determine that there was a recession. So the last two recessions over the past 20 years was obviously the Great Recession, from December 2007 to June 2009. So now for millennials and those who are older, when we hear the word recession, that's what we think of and we start to shake. Those were a rough two years for a lot of people. Also the recession in February of 2020 through April of 2020. But do you know what those two time periods have in common with the home inspection industry? Huge growth. 

For instance, my first inspection company really started to take off in 2007 and, matter of fact, I started my second inspection company somewhere shortly after that, 2000...I forget. I have to look it up, and then so on and so forth. The recession was really good for business. The COVID recession in 2020 — I don't need to tell anybody listening to this for the most part, unless you're new over the past year or two, how big of a boom that was for the home inspection industry. Everybody freaked out. There was obviously a recession. They announced it as one, and we made out amazingly as an industry, and there's a lot of reasons for that, why recessions are good for the home inspection industry. So let's go over that, because a lot of us might be sitting there worrying and saying, oh no, there's a recession coming. Listen, guys like Warren Buffett, Mark Cuban, all of these other guys, when you actually look at what they talk about, they talk about how they make their money in recessions, because they know when it goes down, it'll always go up. 

My brother's a CPA, and he showed me a chart one time of all measurable data that they've had for recessions and the growth of the economy and stock markets and things like that. And it's always gone up. It has always gone up. And when people freak out at the dips and they sell and they close their businesses and all that stuff, they miss the quick rise that happens right after it. We may not be savvy investors like Warren Buffett or Mark Cuban or any of these other fancy rich folk, but we can still take advantage of the dips because they're good for our business. Here's a couple reasons why. 

First of all, think about right now. Right now, there was a lot of home inspection companies that went out of business from 2023, and we've talked about a lot on this podcast, to now. Real estate agents have gone out of business. There's not enough housing inventory. Housing stock is too expensive. The gray wave, they called it, didn't happen because older people are holding onto their homes longer and longer than in years past. There's all these things, because the economy has done pretty well. So when a recession comes, it changes that. It changes it for the mass of the population. But there are industries that do well in a recession. 

For instance, home sales tend to increase. So for instance, and this is unfortunate, and it is sad, but imagine we are a middle class family. We bought a $500,000 house, and you know, that was the max that we could we could buy, and we thought everything was going to be okay. Now we are 5, 10 years into it, and we can't afford our mortgage or we lost our job, whatever happens, we now need to sell. So that might be, I don't know, let's say two to 5% of the population, and at varying different ranges, a $200,000 house to a $2 million house, but those houses now hit the market. They would not have hit the market unless there was a recession.

Now, also, during a recession, there's going to be people selling for various different reasons that you know, they're going to be outlying cases, but those outliers are important to note. So for instance, somebody might have to move to get a different job. So for instance, I know a guy that moved many, many years ago. He needed to move because the only job he could find in his industry was in Florida. So now that opened up a home in New York, and it also brought a buyer to Florida. So two transactions happened because that one guy had to move because of his job. That happens a lot more frequently during a recession, and especially immediately after a recession. 

To keep the economy from floundering too, the government will often make adjustments, sometimes in interest rates or give incentives. For those of you who were around during the Great Recession, remember when they started giving people money to put a down payment on their house? I mean, there was lots of people. There are friends of mine, they're like, we had the money anyways, but they're giving us free money. And some people were saying, you know, I didn't even think about buying a home, but they're giving me part of the down payment. Stuff like that will begin to happen over time. But more importantly, when there is a recession, there are more homes for sale. Now that compounds. So right now, housing stock is too expensive. 400 grand for the average home is insane. There are large swaths of the population that are out priced out of home ownership. So what happens now is you add, you know, X many 1000s of homes to any given market, or hundreds of homes to a market, and when there's more of something, it becomes less expensive. So it's going to bring down the price of homes. And now, once a seller used to put his house on the market, have 15 offers, and it would sit there for maybe a week, you know, that would drive the prices up. Now that seller is going to have to compete with other sellers, because now there's less people buying because of the recession, and the price is going down. So then eventually, after the recession, typically few months, couple of years, if you're we're talking about the Great Recession, but it's usually going to be less than a year, in certain respects, the home prices come down, and the ability of buyers starts to come back up, and then they tend to meet, and that's the sweet spot, right after a recession, that can go on for months and years, and in the case of the Great Recession, over a decade of just, you know, prices of homes and the ability of buyers meeting right at the sweet spot. So all of that compounds to a recession being good for home inspectors. 

Then think about this. When there's more competition on the market, there's also going to be sellers who are going to want to do pre-listing inspections. I miss pre-listing inspections. We don't do them very often anymore. They used to be pretty common 10, 15 years ago, because it was a buyer's market. You need to make your house look good. But when it's not a buyer's market, you know, sellers don't care as much, and they're like, ah, put on the market, see what happens. So we tend to get more pre-listing inspections, so now that adds to it. So let's say 10% of all homes get pre-inspected. Cool, that adds a ton of home inspections back onto the market, and typically those homes that got a pre-listing inspection still get the buyer having their own home inspector on top of that, so that amplifies how many inspections happen. Then buyers also become more cautious when it becomes a buyer's market and there's a recession, so people tend to be a little bit more frugal, like you've seen all these big trends on the internet of buy canned goods that last longer for inflation and the tariffs and all these other things, people become more cautious. So when they are that cautious, they become more cautious when buying a home. Very unlikely to have the majority of buyers skipping home inspections when there's a recession going on. So now buyers find something that they don't like or could cost them a lot of money or is a little scary, instead of just buying a home, moving in, and seeing what happens, they move on to the next home. So now that creates more inspections. So let's say I inspect the house and I find that it needs a $30,000 roof and there's a foundation issue with a big question mark on it, that person goes and buys another home and I do the inspection on that one. So now that not only creates another inspection. It actually creates two because the people that the house that they walked away from those sellers, they still need to sell to somebody else, and now another home inspector comes in, so it actually creates three inspections out of just one. So can we see how the math is starting to compound a little bit? This is where we start to shine. We do thorough, good inspections, protect our clients, and the inspections just start to happen. 

And it's funny every time, every time the cycle happens, we start to think, I'm an amazing business person. Everything's awesome. To be honest with you, it's just gonna be free inspections, kind of, for lack of a better term, we're just gonna show up, and the inspections are gonna land in our lap. We won't have to fight for them as hard as we did before. We still have to fight for them. Still have to market, and those who market hard and fight for them are going to have even more but this is where multi-inspection firms are born. This is where single inspectors, who are struggling, maybe doing one inspection a month or a couple every month or two, are really going to start to do two or 300 inspections a year. This is where people grow. Then, on top of that, foreclosures and bank owned properties. A lot of us will do that on the side. We'll inspect bank foreclosed properties. I remember doing that in 2007, it's kind of fun, a little bit scary sometimes, but you know what? For 150 bucks, you're gonna go pay me to take a picture on the outside and the inside of the home to make sure there's no squatters. Cool. I'll do 10 of those a day if you want and be home by four. So those tend to happen too. But then on top of it, those bank and foreclose properties also turn into real full on home inspections. Then we also have investors who flood the market. So we all probably had an investor client or two, and they build their portfolio, these two-families that investors like to buy, or three and four-families, those are going to start to increase, because now they're like, oh, okay, well, the house prices are going down a little bit. This is time for me to build up my portfolio. They almost always invariably get a home inspection, at least in my area, and even if only half of them do, that's still more inspections on the market. 

This one is going to seem counterintuitive, but new construction starts to slow. Now we may think, well, doesn't that hurt us. If we're in a state like Texas, maybe a little bit, because we're not going to have as many new construction inspections. New Construction is pushing out a lot of homes right now, but those homes that were new construction last year during a recession become homes that get sold this year, or are coming up on the 11th month inspections. Also the new construction that actually does happen, people are again going to be a little bit more cautious, so they're more likely to get, you know, phase inspections, you know, pre-drywall and all those things. So it seems counterintuitive, and I'm not going to go too much in depth into it, because it is actually a smaller percentage of the increase in the market. But even as new construction slows, it's actually good for us. 

Commercial property transactions increase. This one's always an odd one, and there's a very complex reason this happens. But the simple explanation is basically businesses tend to downsize or move to cheaper space, and that's the basics of it. So if a business is going to downsize and they're going to either buy a new building or lease a smaller space, what do they need? An inspection. So if you're a, you know, $14 million company moving to a smaller office space, they're not going to cry about a $2,000 inspection. They just want to downsize because that was 1/10 of what their rent was last month in the new in the old space. So we tend to get more commercial inspections when there's a recession, too. If we do 203(k) loans, and this could be a whole separate podcast, but if we do those, or we've been thinking about getting into them, guess what increases during a recession? 203(k) loans, renovation loans, things like that. If we want to get into it, that's a good time to do it, because people are going to be like, okay, I want to be careful with my money. I want to buy a cheaper house that needs to be renovated, and they get a 203(k) loan. 

Then the last point, and this invariably happens, and it's really sad, because if you're listening to this podcast, hopefully you stick around. But in reality, we as people are emotional and competition thins out. So think about it this way, there are experienced stock market people who invest millions, 10s of millions, and usually, when you get into the billions range, they don't make this silly mistake, but when the market dips, they start pulling money, and they're like, oh, I better just stop my losses. And that's why we get a big dip. If investors said, okay, hold steady, there would be no dip. But instead, investors are like, okay, this stock was worth $20,000 last month. It's worth $15,000 this month. I'm selling at a loss, because I don't want to go to $10,000. Then they look at it two months later and are like, oh, see, it's at $10,000 and they think that they saved five grand. What they don't do is think about six to eight months later, and now that $20,000 stock is worth 30,000 or even, let's say lower 22,000, all they did was lose seven grand at its lowest. 

So this same thing happens in the home inspection industry. We act emotionally on things as human beings. We see everybody freaking out. People outside the home inspection industry usually create this fear for us in our industry. Our friends will be like, oh, I lost my job, and we feel bad for them, and they're like, oh, the stock market. Or we have that one friend who goes, oh, there's $100,000 I lost in my retirement portfolio. You didn't lose it. Just wait. My brother was a CPA, always telling me that, just wait, you didn't lose it. It comes back. And listen, if it doesn't come back, people are like, what if it doesn't come back? If it doesn't come back, then the stock market has crashed completely, and all currency is now worthless anyways. Go grab your zombie club and hide in your bunker. It's a no lose situation. Keeping and sticking in the game does not lose us anything, but this fear starts to surround us because of everybody. And you know what, if we are in the financial sector, if we are a dentist, if we are a home builder, if we are just about anything else, we're going to feel the effects in a bad way of a bad economy, of a recession. For home inspectors, it's the opposite. If you look at my books, over the past 20 years, recessions have been very, very good to me and have been very good to my businesses. And if you look at those who are around for the recession in 2020, it was good for them too. 

So is a recession good for home inspectors? Heck, yeah, yeah, totally. So if you can stick around and not be the part that gets thinned out, if there is going to be a recession now, cool. Look forward to it. You know what? It's going to be great for our industry. But either way, it's going to happen eventually. It usually happens within a decade of each other. So whether it's now, two or three years from now, whatever it is, look forward to the recessions, because that's when home inspection companies, we really start to shine. So thank you for listening in. We'll look forward to seeing you on the next episode of Inspector Toolbelt Talk.

Outro: On behalf of myself, Ian, and the entire ITB team, thank you for listening to this episode of Inspector Toolbelt Talk. We also love hearing your feedback, so please drop us a line at info@inspectortoolbelt.com.

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*The views and opinions expressed in this podcast, and the guests on it, do not necessarily reflect the views and opinions of Inspector Toolbelt and its associates.