Here’s why a recession doesn’t automatically mean a crash in home prices.

 

I’ve been getting this question quite a lot recently: Is the upcoming recession going to cause the real estate market to drop? Let’s look at some historical data and make that forecast today.

 

Before we get into what will happen, let’s talk about what’s going on. A recession is defined as two consecutive quarters of a slowdown in GDP. We typically see a ramp up, the peak, and a decline. It’s inevitable that we will see another recession, but will that hurt the housing market?

 

Take a look at the chart at 0:55 in the video above from Keeping Current Matters. It shows what housing prices have done during the last six recessions. In four out of six, home prices actually went up. 2008 is really the only time we’ve seen a big drop over the last six corrections. When people hear the word recession these days, that’s the market they have in mind. Most of the time, though, the housing market actually appreciates during a recession. 

“We will start to see demand and appreciation slow down.”

 

Interest rates are another hot topic because they’ve been on the rise lately. It’s true that they’ve risen considerably this year, but they’re still well below historical averages. In the 1980s, the average rate was 16.5%. I don’t think we’ll necessarily see a drop in the market because I don't see supply increasing dramatically from its already low level. Demand will remain high, but we will start to see the market slow down from its frenetic pace.

 

If you have any questions at all about the market or real estate in general, don't hesitate to reach out via phone or email. I look forward to hearing from you soon.