A Recession Doesn’t Equal a Housing Crisis

Lisa Mailhot  |  May 11, 2023

Buyers

A Recession Doesn’t Equal a Housing Crisis



Everywhere you look, people are talking about a potential recession. And if you’re planning to buy or sell a house, this may leave you wondering if your plans are still a wise move. To help ease your mind, experts are saying that if we do officially enter a recession, it’ll be mild and short. As the Federal Reserve explained in their March meeting:

“. . . the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years.” 

While a recession may be on the horizon, it won’t be one for the housing market record books like the crash in 2008. What we have to remember is that a recession doesn’t always lead to a housing crisis.

To prove it, let’s look at the historical data of what happened in real estate during previous recessions. That way you know why you shouldn’t be afraid of what a recession could mean for the housing market today.  

A Recession Doesn’t Mean Falling Home Prices 

To show that home prices don’t fall every time there’s a recession, it helps to turn to historical data. As the graph below illustrates, looking at recessions going all the way back to 1980, home prices appreciated in four of the last six of them. So historically, when the economy slows down, it doesn’t mean home values will always fall.

Most people remember the housing crisis in 2008 (the larger of the two red bars in the graph above) and think another recession will be a repeat of what happened to housing then. But today’s housing market isn’t about to crash because the fundamentals of the market are different than they were in 2008. Back then, one of the big reasons why prices fell was because there was a surplus of homes for sale at the same time distressed properties flooded the market. Today, the number of homes for sale is low, so while home prices may see slight declines in some areas and slight gains in others, a crash simply isn’t in the cards. 

A Recession Means Falling Mortgage Rates

What a recession really means for the housing market is falling mortgage rates. As the graph below shows, historically, each time the economy slowed down, mortgage rates decreased.

Bankrate explains mortgage rates typically fall during an economic slowdown:

“During a traditional recession, the Fed will usually lower interest rates. This creates an incentive for people to spend money and stimulate the economy. It also typically leads to more affordable mortgage rates, which leads to more opportunity for homebuyers.” 

This year, mortgage rates have been quite volatile as they’ve responded to high inflation. The 30-year fixed mortgage rate has hovered between roughly 6-7%, and that’s impacted affordability for many potential homebuyers. 

But, if there is a recession, history tells us mortgage rates may fall below that threshold, even though the days of 3% are behind us.

Bottom Line

You don’t need to fear what a recession means for the housing market. If we do have a recession, experts say it will be mild and short, and history shows it also means mortgage rates go down.

RECENT BLOG POSTS

Top 15 U.S. Cities Where Quality of Life Shines Bright in 2024–25

Discover the 15 U.S. cities leading in quality of life for 2024–25, as ranked by U.S. News & World Report. From affordability challenges to cultural gems and natural b… Read more

She-Elites Are Shaping the Future of Luxury Real Estate

Women are redefining the luxury real estate market, emerging as powerful decision-makers in high-end home buying and selling. Discover how this trend is transforming t… Read more

Shield Yourself: How to Spot and Avoid Real Estate Scams

Protect your investment! Learn how to identify red flags in real estate scams, from wire fraud to fake listings. Safeguard your hard-earned money with these expert tip… Read more

Winter Freeze: Real Estate Market Sees Sharpest Slowdown in Two Years

Discover the trends that froze the real estate market in December, as homes lingered on the market and inventory plunged. What does this mean for buyers and sellers he… Read more

California’s New Wildfire Insurance Rule: What It Means for Homeowners

California's new insurance regulation requires coverage in wildfire-prone areas but may result in significant cost increases for homeowners. Learn how this impacts hom… Read more

2025 and Beyond: Navigating the Turbulent Waters of Real Estate Antitrust Litigation

As real estate braces for 2025, antitrust litigation remains a key battleground. Learn about the appeals, buyer-side lawsuits, policy shifts, and DOJ scrutiny reshapin… Read more

Understanding Quitclaim Deeds: When and Why You Might Need One

Quitclaim deeds are a quick and efficient way to transfer property between family members or spouses without a sale. Learn what a quitclaim deed is, how to create one,… Read more

Unpacking the Surge in Existing-Home Sales Across the US

In November, existing-home sales reached a three-year high with a 6.1% annual increase, led by significant growth across three major U.S. regions. This blog explores t… Read more

Navigating the Rising Tide: Protecting Your Home in Insurance Deserts

Explore the challenges and solutions facing homeowners in areas known as "insurance deserts" where escalating premiums and climate risks make obtaining affordable cove… Read more

We are excited to assist you in finding your perfect home

Let's find a time that suits you best to chat about your goals, show you how we work, and figure out how we can help you the most