Housing Market Insights from Past Recessions

As talk about a potential recession looms, it's natural to feel a sense of uncertainty and fear about what it could mean for the housing market. After all, your home is likely one of your biggest investments. But, before you panic, it's important to understand that the housing market has historically been resilient during economic downturns.

While past recessions have certainly had an impact on the housing market, the effects have been varied and not always negative. In some cases, home values have taken a hit and sales have slowed, but in other instances, the market has remained relatively stable, even during the most severe economic downturns.

It's important to remember that every recession is unique and the current market may not follow the same patterns as the past. However, with historically low interest rates and high demand for housing, many experts believe that the market may be better equipped to weather an economic downturn this time around. Additionally, government stimulus packages may also help to cushion the blow to the market.

While no one can predict the future, it's important to stay informed and seek advice from experts to make informed decisions about your housing investments. Don't let fear paralyze you from making sound financial decisions, remember that history has shown us that the housing market can be resilient during recessions.

A Recession Doesn’t Mean Falling Home Prices

The historical data unequivocally confirms that home prices do not necessarily plummet during every recession. In fact, during four out of the last six recessions, home prices have drastically appreciated, defying all expectations. This solid evidence dispels the myth that there is a direct and inevitable correlation between economic slowdowns and plummeting home values.

This graph shows how in the time around the housing crash there were over one million foreclosure filings per year. As lending standards tightened since then, the activity started to decline. And in 2020 and 2021, the forbearance program was a further aid to help prevent a repeat of the wave of foreclosures we saw back around 2008.

A Recession Means Falling Mortgage Rates

During a recession, mortgage rates tend to decrease due to Federal Reserve policy. However, a recession can also lead to a decrease in housing demand and prices, making it less favorable time to purchase a home, and job loss and financial instability can make it harder for individuals to qualify for a mortgage loan.

As an individual, it's important to understand how economic conditions may impact your ability to secure a mortgage. During a recession, mortgage rates tend to fall, making it a good time to consider buying a home or refinancing your current mortgage. However, it's also important to keep in mind that even if rates fall, they may not drop as low as they have in the past. Additionally, a recession can also lead to job loss or a decrease in income, which may affect your ability to qualify for a mortgage. Overall, it's important to stay informed about economic conditions and to work with a financial advisor to determine the best time for you to make a move in the housing market.

Bottom Line

It's great that you're considering buying or selling a home this year. The housing market is constantly changing and it's important to have expert advice to understand the current market conditions and how they may impact your specific homeownership goals. I would be happy to connect with you and provide you with the information you need to make informed decisions. Let's schedule a time to discuss your needs and the current market trends.