What Past Recessions Tell Us About the Housing Market
The housing market is one of the most important aspects of the economy, and recessions can have a major impact on it. In this blog post, we’ll take a look at what past recessions tell us about the housing market and what we can expect in the future.
What is a recession?
As talk about a potential recession grows, many are wondering what a recession could mean for the housing market. Contrary to popular belief, home prices have not necessarily dropped during periods of economic downturns. As the graph below illustrates, looking at recessions going all the way back to 1980, home prices have actually appreciated in four of the last six of them. As such, it can be said that when the economy slows down, it doesn’t always correlate with a decrease in home values. This data should comfort homeowners and other real estate holders as they continue to navigate this uncertain economic climate. Establishing an understanding of what past recessions have meant for housing trends can help individuals confidently make informed decisions moving forward.
How past recessions have affected the housing market
Most people remember the housing crisis in 2008 and assume another recession would bring a return of that disaster. However, today’s housing market is not as vulnerable to economic recessions because different fundamental factors are at play. Experts estimate that while home prices will likely fluctuate by area, they won’t experience a crash like the one in 2008 nationwide. Additionally, research has demonstrated that when the economy slows down, mortgage rates tend to decrease. Though certainly an economic recession could affect the housing market, this knowledge of potential mortgage rate decreases may be good news for those looking to become homeowners in the future.
What experts are predicting for the future of the housing market
In 2023, market experts say we can expect mortgage rates to stabilize and remain low. Inflation has already begun to cool, indicating that a further drop in rates is possible. Although the days of 3% are likely behind us, the housing industry is predicted to remain strong throughout any potential recession. In fact, experts believe that housing would play an important role in helping the economy rebound quickly if a mild recession were to occur.
Conclusion
A recession can be defined as two consecutive quarters of negative economic growth as measured by a country’s gross domestic product. However, a recession doesn’t necessarily mean that the housing market will crash—as we saw in 2008. In fact, in most recessions since World War II, home values have actually appreciated and mortgage rates have declined. With all this uncertainty surrounding the economy, it’s more important than ever to partner with a real estate professional who can help you navigate these uncharted waters and achieve your homeownership goals. Are you thinking about buying or selling a home this year? Let’s connect so you have expert advice on what’s happening in the housing market and how it might impact your plans.