With recession concerns dominating the headlines, many are questioning how the housing market would be affected if one occurs this year.
To gain insight, let’s explore historical data and see how past recessions, dating back to the 1980s, have impacted real estate.
Will Home Prices Drop in a Recession? History Says Otherwise
Many fear that a recession means home prices will plummet, just like in 2008. But that downturn was an anomaly, not a pattern. In reality, major price drops haven’t been the norm.
CoreLogic data reveals that in four of the last six recessions, home prices actually appreciated rather than declined (see graph below):
Before assuming a recession will lead to a drop in home prices, take a look at the data. History shows that home prices usually continue on their current path. And right now, on a national level, home values are still increasing at a balanced and steady rate.
Mortgage Rates Tend to Drop During Economic Slowdowns
Historically, while home prices often remain steady, mortgage rates typically decrease during recessions. Looking at data from the past six recessions, we see that mortgage rates declined each time (see graph below):
A potential recession could lead to lower mortgage rates, based on historical data. While this may improve affordability, a return to 3% rates is unlikely.
Bottom Line
We don’t yet know for sure if a recession will happen, but the chances have increased. However, history gives us valuable insights into how the housing market may respond.
When you hear discussions about a possible recession, what questions or concerns do you have about buying or selling a home?