Recessions and Real Estate
The media has been sounding the alarms on a potential recession this year, which has many questioning if it’s a good time to purchase a home. When people hear about recessions, most remember the sharp decline in home prices during the housing bubble and 2009 recession. Many often mistakenly believe that the recession caused the housing bubble, but it was quite the opposite – the housing bubble led the U.S. into a recession.
Looking back at the other eight recessions since 1960, home prices significantly increased or at least remained stable each time during and after the recession. One of the reasons this occurs is because interest rates significantly fall during recessionary periods.
During the housing bubble, risky, non-verified mortgages were commonplace. There was a glut of supply in the real estate market along with much lower buyer demand. Today’s housing market is much stronger – there are 3 million fewer homes for sale compared to the housing bubble, and 14 million more households. Strong demand and tight supply should continue to be supportive of home prices.