What a Recession Could Mean for the Real Estate Market
With ongoing discussions about the possibility of a recession, many homeowners, buyers, and investors are asking: what could a recession mean for the real estate market? Understanding historical trends can help you make more informed decisions about buying or selling real estate, even during uncertain economic times.
Recession Doesn’t Always Lead to Falling Home Prices
A common misconception is that recessions automatically cause a drop in home prices. While the 2008 housing crash was severe, it’s an outlier in modern history. Data from CoreLogic and other sources show that in most recessions over the past 40 years, real estate prices either held steady or increased slightly.
For real estate sellers, this means you don’t necessarily have to panic if economic news points toward a downturn. Real estate markets tend to follow long-term trends rather than react dramatically to short-term economic shifts. Buyers should also remember that real estate can remain a solid investment even during a recession, as supply and demand dynamics continue to play a key role. (see graph below):
So, if you’re thinking about buying or selling a home, don’t assume a recession will lead to a crash in home prices. The data simply doesn’t support that idea. Instead, home prices usually follow whatever trajectory they’re already on. And right now, nationally, home prices are still rising at a more normal pace.
Mortgage Rates Often Drop During Recessions
Historically, mortgage rates tend to decline during economic slowdowns. Lower rates can create opportunities for homebuyers looking to enter the real estate market or refinance existing properties. While rates might not return to historic lows, even a modest reduction can make real estate more accessible.
For real estate investors, this pattern provides a strategic window to purchase or expand property holdings, knowing financing costs may be temporarily lower. Sellers can also anticipate that motivated buyers may be ready to take advantage of more favorable mortgage conditions.
So, a recession means mortgage rates could decline based on the data. While that would help with affordability, don’t expect the return of a 3% rate.
Real Estate is Resilient
The real estate market has proven resilient through past recessions. Homes are not just assets—they’re essential to daily life, and demand doesn’t disappear even during slower economic periods. For homeowners considering selling, it’s important to recognize that the right pricing and marketing strategy can still lead to successful transactions.
Likewise, buyers in real estate can benefit from less competition and the potential for lower mortgage rates. Real estate markets don’t operate in a vacuum, but history shows that property values are rarely completely derailed by a recession.
Planning for Your Real Estate Decisions
Whether you’re buying, selling, or investing in real estate, staying informed is critical. Keep an eye on mortgage trends, local market activity, and economic indicators that can influence real estate decisions. Partnering with a knowledgeable real estate agent can help you navigate potential challenges and seize opportunities, even during a recession.
The bottom line: recessions don’t automatically mean a collapse in real estate prices. Historical data demonstrates that real estate remains a valuable long-term investment, with mortgage rates and demand adjusting to economic conditions. By approaching the real estate market strategically, buyers and sellers alike can make informed choices that align with their goals.
Key Takeaways for the Real Estate Market:
Home prices generally remain stable during most recessions.
Mortgage rates often decline, creating opportunities for buyers and refinancers.
Real estate is resilient due to ongoing demand for housing.
Partnering with a real estate professional is crucial for navigating uncertain markets.
Thinking about your next move in the real estate market? Understanding these trends can help you make confident, informed decisions—whether you’re buying your first home, selling, or expanding your real estate portfolio.
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Katie Moe and Keeping Current Matters, Inc. do not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Katie Moe and Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.
