What Happens to Housing when There’s a Recession?

Since the collapse of the housing bubble in 2008, the phrase "recession" has greater emotional resonance than ever. While there is some disagreement over whether we are currently experiencing a recession, the good news is that economists predict that any downturn would be brief and that the economy would swiftly recover. According to KPMG's CEO Outlook for 2022:

“Global CEOs see a ‘mild and short’ recession, yet optimistic about global economy over 3-year horizon . . .

Over 80% of people believe there will be a recession within the next 12 months, with more than 50% believing it will be minor and brief.

Housing is often one of the first industries to recover during a slowdown, which only strengthens that opinion. According to Ali Wolf, Chief Economist at Zonda:

“Housing is traditionally one of the first sectors to slow as the economy shifts but is also one of the first to rebound.”

This recovery is related in part to past trends in mortgage rates during downturns. To relieve your concerns, take a look at rates from prior economic downturns.

Mortgage Rates Typically Fall During Recessions

Historical information provides a clearer picture of how a recession can affect the cost of mortgage lending. The graph below illustrates how mortgage rates reduced each time the economy contracted in this country starting in 1980.

“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. 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.”

Even while history doesn't always repeat itself, we may still learn from and take solace in the patterns of what has already transpired. Working with a reputable real estate agent will help you make the best choice if you're considering buying or selling a house. You will then receive professional guidance on what a recession would entail for the home market.

History demonstrates that when it comes to the housing market, you shouldn't be afraid of the phrase recession. Work with a real estate professional if you have concerns about the current situation so that you can receive professional guidance and insight you can rely on.

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