What Would a Recession Mean for the Housing Market?

<article class="post-416877 post type-post status-publish format-standard has-post-thumbnail hentry" id="post-416877"><span class="entry-date">August 16, 2022</span><div class="entry-header center-block text-center"><h1 class="entry-title">What Would a Recession Mean for the Housing Market?</h1><div class="shareBlock"><div class="shareTitle">Share</div><div class="shareIcons"><a aria-label="Twitter Share Link" class="twitter solid display-inline-block" data-tracking="Post,Social Post Link Clicked,Twitter" href="http://twitter.com/share?text=What+Would+a+Recession+Mean+for+the+Housing+Market%3F&amp;url=https%3A%2F%2Fgilliggroup.com%2Fblog%2Fwhat-would-a-recession-mean-for-the-housing-market%2F" target="_blank"><span class="force-hidden">Twitter</span></a>
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<p><img alt="What Would a Recession Mean for the Housing Market? | Simplifying The Market" class="webfeedsFeaturedVisual wp-post-image" decoding="async" link_thumbnail="" loading="lazy" sizes="auto, (max-width: 549px) 100vw, 549px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125123/20220816-KCM-Share-549×300.jpg" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125123/20220816-KCM-Share-549×300.jpg 549w, https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125123/20220816-KCM-Share.jpg 750w" style="display: block; margin-bottom: 5px; clear:both;max-width: 100%;" width="358"/></p>
<p>According to a <a href="https://www.wsj.com/articles/economic-forecasting-survey-archive-11617814998">recent survey</a> from the <em>Wall Street Journal</em>, the percentage of economists who believe we’ll see a recession in the next 12 months is growing. When surveyed in July 2021, only 12% of economists consulted thought there’d be a recession by now. But this July, when polled, 49% believe we will see a recession in the coming 12 months.<span id="more-47004"></span></p>
<p>And as more recession talk fills the air, one concern many people have is: <em>should I delay my homeownership plans if there’s a recession? </em></p>
<p><strong>Here’s a look at historical data to show what happened in real estate during previous recessions to help prove why you shouldn’t be afraid of what a recession would mean for the housing market today.</strong></p>
<h4><strong>A Recession Doesn’t Mean Falling Home Prices</strong></h4>
<p>To show that home prices don’t fall every time there’s a <a href="https://www.corelogic.com/blog/2019/03/housing-recessions-and-recoveries.aspx">recession</a>, it helps to turn to <a href="https://www.thebalance.com/the-history-of-recessions-in-the-united-states-3306011">historical data</a>. As the graph below illustrates, looking at the recessions going all the way back to 1980, <a href="https://www.simplifyingthemarket.com/2022/08/11/what-does-the-rest-of-the-year-hold-for-home-prices/?a=712984-fa409495d5d70154d03a25e81e9540e2">home prices</a> appreciated in four of the last six recessions. So, historically, when the economy slows down, it doesn’t mean home values will fall.</p>
<p><a href="https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125125/20220816-MEM-Eng-1.png"><img alt="What Would a Recession Mean for the Housing Market? | Simplifying The Market" class="aligncenter wp-image-47006" decoding="async" height="488" loading="lazy" sizes="auto, (max-width: 650px) 100vw, 650px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125125/20220816-MEM-Eng-1.png" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125125/20220816-MEM-Eng-1.png 1000w, https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125125/20220816-MEM-Eng-1-400×300.png 400w" width="650"/></a></p>
<p>Most people remember the housing crisis in 2008 (<em>the larger of the two red bars in the graph above</em>) and think another recession would repeat what happened then. But this housing market <a href="https://www.simplifyingthemarket.com/2022/08/02/3-graphs-to-show-this-isnt-a-housing-bubble/?a=712984-fa409495d5d70154d03a25e81e9540e2">isn’t about to crash</a>. The <a href="https://www.simplifyingthemarket.com/2022/07/14/housing-experts-say-this-isnt-a-bubble/?a=712984-fa409495d5d70154d03a25e81e9540e2">fundamentals</a> are very different today than they were in 2008. So, don’t assume we’re heading down the same path.</p>
<h4><strong>A Recession Means Falling Mortgage Rates</strong></h4>
<p><a href="https://mtg-specialists.com/2022/05/11/recession-interest-rates-and-real-estate/">Research</a> also helps paint the picture of how a recession could impact the cost of financing a home. As the chart below shows, historically, each time the economy slowed down, <a href="https://www.freddiemac.com/pmms/archive">mortgage rates</a> decreased.</p>
<p><a href="https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125126/20220816-MEM-Eng-2.png"><img alt="What Would a Recession Mean for the Housing Market? | Simplifying The Market" class="aligncenter wp-image-47007" decoding="async" height="488" loading="lazy" sizes="auto, (max-width: 650px) 100vw, 650px" src="https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125126/20220816-MEM-Eng-2.png" srcset="https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125126/20220816-MEM-Eng-2.png 1000w, https://files.simplifyingthemarket.com/wp-content/uploads/2022/08/15125126/20220816-MEM-Eng-2-400×300.png 400w" width="650"/></a></p>
<p><em>Fortune</em> <a href="https://fortune.com/2019/06/19/next-recession-assets-mortgage-rates/">explains</a> that mortgage rates typically fall during an economic slowdown:</p>
<blockquote>
<p><em>“<strong>Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. </strong>And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.”</em></p>
</blockquote>
<p>And while history doesn’t always repeat itself, we can learn from and find comfort in the historical data.</p>
<h3><strong>Bottom Line</strong></h3>
<p>There’s no doubt everyone remembers what happened in the housing market in 2008. But you don’t need to fear the word <em>recession</em> if you’re planning to buy or sell a home. According to historical data, in most recessions, home price gains have stayed strong, and mortgage rates have declined.</p>
<p>If you’re thinking about buying or selling a home, let’s connect so you have expert advice on what’s happening in the housing market and what that means for your homeownership goals.</p>
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