What a Recession Means for the Housing Market

According to Keeping Current Matters, with recession discussions dominating the news, many are left wondering how a potential economic downturn could impact the housing market. While there’s uncertainty around what exactly lies ahead, it’s important to examine past trends to get a clearer picture of what might happen to home prices and mortgage rates.

A Recession Doesn’t Necessarily Mean Falling Home Prices

It's common to assume that a recession would cause home prices to plummet, especially given the steep drop we saw during the 2008 housing crisis. However, this was an anomaly and not reflective of typical patterns. In fact, historical data from CoreLogic reveals that, in four out of the last six recessions, home prices actually increased.

While every recession is unique, past trends suggest that home prices often follow their existing trajectory, even during economic slowdowns. Right now, home prices across the country are rising at a more steady pace, and this trend is likely to continue, regardless of the broader economic conditions.

Mortgage Rates Tend to Drop During Recessions

In addition to the resilience of home prices, another key factor to consider is mortgage rates. Historically, mortgage rates tend to decrease during recessions. Data from past recessions shows a consistent pattern of falling rates, which could help improve affordability for potential buyers.

However, while rates may drop, it’s unlikely we’ll see a return to the ultra-low rates we saw in previous years. Even so, lower mortgage rates can still provide an opportunity for buyers to secure a more favorable loan, even during uncertain times.

The Bottom Line: What to Expect in a Recession

While the possibility of a recession is rising, it doesn’t necessarily mean a housing market crash is on the horizon. Historical data indicates that, in most cases, home prices hold steady or continue to climb, while mortgage rates tend to decline, offering some relief to buyers. As always, it’s essential to stay informed and keep an eye on market trends, but rest assured, the housing market has proven resilient during previous economic slowdowns.

source: keepingcurrentmatters.com