What Happens to the Housing Market During a Recession? Here’s What History Tells Us
Recession fears have been making headlines lately, and it’s understandable if you’re feeling a bit uneasy, especially if you’re thinking about buying or selling a home. The big question on many people’s minds is: What would a recession mean for the housing market? Let’s take a look at the historical data and break down what typically happens to home prices and mortgage rates during economic slowdowns.
A Recession Doesn’t Mean Home Prices Will Fall
One of the most common misconceptions is that home prices will plummet if we enter a recession. That belief is largely rooted in the memory of the 2008 housing crash. But here’s the thing: 2008 was the exception, not the rule. Looking at data from CoreLogic, in four of the last six recessions, home prices actually went up. Yes, up. Outside of 2008, which was fueled by a housing crisis and loose lending practices, home values have largely remained stable or even grown during economic downturns.
That’s because recessions don't cause home prices to crash, other factors do, like oversupply, high foreclosures, or unstable lending. And right now, we’re not seeing those red flags. Instead, home prices nationwide are still on the rise, just at a more normal pace compared to the frenzied market of the past few years. ​During 2020, a year marked by the most recent economic downturn, the local housing market in Downers Grove, demonstrated resilience. According to data from WalletInvestor, the average home price in Downers Grove at the beginning of 2020 was approximately $347,530 and increased to around $349,204 by the end of the year, indicating a modest appreciation.
Mortgage Rates Typically Decline During Recessions
Here’s another silver lining: mortgage rates tend to drop when the economy slows down. If we look back at the last six recessions, mortgage rates fell every single time. Lower rates can help ease affordability challenges, especially for buyers. However, it’s important to keep expectations realistic, we’re not likely to see rates return to the historic lows of 3%. Still, even a modest dip in rates can make a meaningful difference in monthly payments.
So, What Should You Do If You’re Thinking About Buying or Selling?
While no one can say with certainty what lies ahead, history gives us a clear roadmap: Recessions don’t automatically mean home prices will fall. Mortgage rates often decline, creating opportunities for buyers. If you’re on the fence about making a move, don’t let fear of a recession hold you back. The housing market behaves differently than other sectors during economic slowdowns, and the data shows that it tends to stay resilient.
Bottom Line:
The odds of a recession may be rising, but that doesn’t mean the housing market is headed for a crash. Historically, home prices have held steady or even climbed through most recessions, and mortgage rates have typically dropped. If you're considering a move, this could be a moment of opportunity rather than a reason to pause.
Have questions about what today’s market means for your personal goals? Let's chat. We are here to help you make confident, informed decisions, no matter what the headlines say.
