Every time the word "recession" appears in the news, people start to worry—especially if they're thinking about buying or selling a home.
You might be asking yourself:
Will home prices fall sharply?
Are mortgage rates going to jump?
Should I wait before buying or selling?
These are understandable questions, and you're definitely not alone. Luckily, history can give us some helpful clues.
Let's look at some facts:
A Recession Doesn’t Always Mean Lower Home Prices
Many people assume that if there’s a recession, housing prices will automatically drop. But that’s not usually the case. In four of the last six recessions, home prices actually increased. In another one, prices dropped by less than 2%. The only big exception was in 2008, but that recession was unique. It involved risky lending practices, too many homes being built, and financial instability that we aren't seeing today.
Here’s what normally happens:
Home prices either stay stable or slow down slightly.
There might be fewer buyers, but that doesn't always cause prices to crash.
Local markets each respond differently, depending on supply and demand.
Mortgage Rates Usually Drop During a Recession
Good news for buyers: mortgage rates often fall when there's a recession. Data from Freddie Mac shows that rates went down during all six of the most recent U.S. recessions.
Why does this happen? Typically, the Federal Reserve lowers interest rates to boost the economy, making borrowing less expensive. While we probably won't see the extremely low rates from 2020 again, even a small decrease can significantly lower your monthly payments.
Homeowners Today Have Plenty of Equity
One big difference from 2008 is that today’s homeowners have built up strong equity. Home prices have increased steadily over the past few years, giving most homeowners a substantial financial cushion.
According to Realtor.com’s analysis of Federal Reserve data:
Even if home prices dropped by 10%, the average homeowner would still have about 69.5% equity (similar to 2021).
A 20% drop would put equity levels back where they were in 2019.
More than half of homeowners (54%) have mortgage rates below 4%, making them less likely to sell unless they choose to.
Because homeowners have such strong equity, we probably won’t see a flood of foreclosures or forced sales. This helps keep prices stable, even when the economy slows down.
Bottom Line
Recessions can cause uncertainty, but history shows housing markets usually stay steady or even improve, and mortgage rates often decrease. Plus, homeowners today are financially strong.
If you have more questions or you're wondering how this could affect your decision to buy or sell, feel free to reach out. My goal is to help you make smart choices based on facts, not fear.