As whispers of an impending recession begin to circulate, many may be wondering what this could mean for the housing market. But, instead of speculating, let’s look at historical data to understand what has occurred in real estate during past economic downturns. Greg McBride, Chief Financial Analyst at Bankrate, states that “two-in-three economists are forecasting a recession in 2023.”
Contrary to popular belief, a recession does not always mean a fall in home prices. In fact, looking at data from recessions dating back to 1980, home prices have appreciated in four out of the last six of them. This indicates that when the economy slows down, it does not necessarily mean a decrease in home values. Additionally, today’s housing market is different from that of 2008 and experts predict that nationwide, home prices will net neutral, not drop drastically as they did in 2008.
On the other hand, a recession does often lead to a decrease in mortgage rates. Historically, each time the economy slowed down, mortgage rates dropped as well. This is because they tend to respond to inflation, and if inflation continues to cool, rates may fall even further.
In summary, while history may not always repeat itself, it can provide insight and understanding. According to historical data, during most recessions, home values have appreciated and mortgage rates have declined. Therefore, it is important to consult with us and not to fear the word recession when it comes to housing. In fact, experts predict that if a recession were to occur, it would be mild and the housing market would play a crucial role in a quick economic recovery.
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