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What Happens to Housing when There’s a Recession?

If you’re like most people, the word “recession” probably sends shivers down your spine. And while there’s some debate around whether we’re officially in a recession right now, the good news is experts say a recession today would likely be mild and the economy would rebound quickly. In this blog post, we’ll take a look at how a recession could impact the cost of financing a home.

Historical data helps paint the picture of how a recession could impact the cost of financing a home. Looking at recessions in this country going all the way back to 1980, the graph below shows each time the economy slowed down mortgage rates decreased.

As the 2022 CEO Outlook from KPMG says above:

So, what does this mean for you if you’re thinking about buying a home during a recession? Well, it’s likely that you would be able to get a lower interest rate on your mortgage. And while that’s good news, it’s important to remember that a recession can also have an impact on home prices. In general, home prices tend to go down during a recession as fewer people are buying and selling homes.

If you’re thinking about buying a home during a recession, it’s important to do your research and be prepared for the possibility of lower home prices. But if you’re able to get a lower interest rate on your mortgage, it could still be a good time to buy a home.

Do you have any questions about buying a home during a recession? We can help! Send us a message or give us a call today.

From 1980 to 2020, there were five U.S. recessions: July 1981-November 1982, July 1990-March 1991, March 2001-November 2001, December 2007-June 2009 and February 2020-?, according to the National Bureau of Economic Research (NBER).

As Ali Wolf, Chief Economist at Zondaexplains above:

In each instance, 30-year mortgage rates fell as the economy weakened, with the biggest drop coming during the early 1980s recession. Rates bottomed out at around 10.5% in 1982 before beginning a gradual climb back up.

The most recent recession was different in that 30-year mortgage rates had already been on the decline for several years before the economy took a turn. Rates hit a low of 3.5% in late 2012 and remained relatively low throughout the recovery period.

Mortgage rates could fall again if we enter a recession in 2020, but it’s important to remember that they may not fall as far as they did last time. And even if rates do fall, home prices could also drop, making it more difficult to afford a home.

Fortune explains above mortgage rates typically fall during an economic slowdown:

If you’re thinking of buying a home in the near future, it’s important to stay up-to-date on economic indicators and speak with a mortgage lender to get an idea of where rates may be headed. They can help you determine how much house you can afford and what type of loan may be best for you.

Entering a recession can be scary, but if you’re prepared and have a solid plan in place, you can weather the storm and come out ahead.

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