Talk of a recession is buzzing in the headlines, and the chances of one occurring this year are climbing. Naturally, this has people asking: what would a recession mean for the housing market?
To get a clearer picture, let’s dive into historical trends and see how the housing market has fared during past recessions, stretching back to the 1980s.
A Recession Doesn’t Guarantee a Drop in Home Prices
It’s a common belief that a recession automatically triggers a plunge in home prices, like the dramatic decline we saw in 2008. But that was a rare case, not the norm. In fact, it’s the only time in recent decades we’ve seen such a sharp fall—and it hasn’t repeated since.
Data from CoreLogic reveals that in four out of the last six recessions, home prices actually increased (see graph below):
So, if you’re considering buying or selling a home, don’t assume a recession will spark a price collapse. The evidence doesn’t back that up. More often than not, home prices tend to stick to their existing path. And as of now, on a national level, prices are still climbing at a steady, more typical rate.
Mortgage Rates Usually Dip During Economic Downturns
While home prices often hold their course, mortgage rates tend to ease downward during recessions. Looking back at the past six recessions, rates dropped in every instance (see graph below):
Based on this pattern, a recession could bring lower mortgage rates. That might improve affordability for buyers, though don’t hold your breath for a return to ultra-low rates like 3%.