A recession does not equal a housing crisis.
What is a recession?
” The classic definition of a recession is consecutive quarters of negative growth. Typically, the National Bureau of Economic Research (NBER) waits for the second quarter of statistics before declaring a recession.
“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”
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A recession does not equal a housing crisis. That’s the one thing that every homeowner today needs to know. Everywhere you look, experts are warning we could be heading toward a recession, and if true, an economic slowdown doesn’t mean homes will lose value.
“The most recent recession prior to this one was the Great Recession of 2008, which actually lasted from 2007 to 2009. And the real estate industry was at the heart of that recession, due to subprime mortgage rates.
Luckily, if you are thinking of buying a house during a recession, the 2020 Recession seems to be much different.
For one, it wasn’t caused by the financial sector. This recession was caused by a pandemic, and there’s reason to believe that once the pandemic is under control, the economy will begin to recover. “
-https://www.upnest.com/1/post/buying-home-during-recession/
Recession DOES NOT = Housing Crisis
To help show that home prices don’t fall every time there’s a recession, take a look at the historical data. There have been six recessions in this country over the past four decades. As the graph below shows, looking at the recessions going all the way back to the 1980s, home prices appreciated four times and depreciated only two times. So, historically, there’s proof that when the economy slows down, it doesn’t mean home values will fall or depreciate.
The first occasion on the graph when home values depreciated was in the early 1990s when home prices dropped by less than 2%. It happened again during the housing crisis in 2008 when home values declined by almost 20%. Most people vividly remember the housing crisis in 2008 and think if we were to fall into a recession that we’d repeat what happened then. But this housing market isn’t a bubble that’s about to burst. The fundamentals are very different today than they were in 2008. So, we shouldn’t assume we’re heading down the same path.
Bottom Line
We’re not in a recession in this country, but if one is coming, it doesn’t mean homes will lose value. History proves a recession doesn’t equal a housing crisis.
Economists expect that the increase in interest rates will cause the market to cool, which could slow the fast pace of home-price growth seen over the past couple of years.
How Rising Fed Interest Rates Affect Home Buyers, Homeowners
As mortgage rates move toward 5%, many people looking for a home aren’t able to afford what they wanted. Rates began rising in January and continued higher in February. The average rate on the 30-year fixed mortgage is now more than a full percentage point higher than it was one year ago.
Mortgage rates are surging faster than expected, prompting economists to lower their home sales forecasts
Four ways the Fed’s interest rate hike could affect you
https://www.washingtonpost.com/business/2022/03/16/fed-interest-rates-impact-economy/
What The Fed Interest Rate Hikes Mean
Why it’s still a prime reason to sell if able—
Tired of hearing it yet? “It’s a sellers’ market!” As a real estate agent, these words have come out of my mouth almost daily in the last year. It’s still true- Demand remains strong and supply remains historically low over in the national housing market and in the Northern Virginia markets. It’s spring and that means the annual homebuying season is in full bloom.
If you’re gearing up to sell your house this year, the ideal time to put it on the market is right around the corner. A new report from Realtor.com has determined that the week of April 10 through April 16 is the best time to list a home for sale in 2022.
Housing Market Update: Prices Reach New High as Few Americans Put Homes Up for Sale
https://www.redfin.com/news/housing-market-update-home-prices-rise-most-since-summer/?
The housing market frenzy will pass. Just not this spring
https://fortune.com/2022/03/11/housing-market-prices-frenzy-will-pass-not-this-spring/
Why it could be prime time to buy
A mortgage payment would be less than rent. Do your homework and work out whether renting vs. buying makes sense in your market. A Rent vs. buy calculator can help you crunch the numbers.
You have a down payment saved up. You’ve done your research and know how much you want to put down, the types of mortgages you can get and have the money already saved up in the bank. It’s also important to speak with a lender who might show you ways to work with a less than ideal down payment.
It May Be Now or Never for Spring Homebuyers Amid Rising Prices and Higher Mortgage Rates
Pending home sales sink in February, setting a grim tone as housing market enters key spring season
https://www.cnbc.com/2022/03/25/home-sales-fall-in-february-ahead-of-key-spring-selling-
Pending Sales Decline for 4th consecutive month
It’s important not to focus solely on home prices instead of a mix of price and interest rates. Ideally, it’s best to buy when both interest rates and home prices are low. If that’s not possible, calculate both the short- and long-term costs of a lower interest rate versus a lower purchase price. When the numbers make the most sense for you, it may be time to make your move. As you can see below, today’s interest rates are still significantly lower than just 15 years ago.
Before it’s too late
Mortgage rates rise with the potential to shake up housing market
Mortgage rates zoom 4.5% – here’s what home buyers need to know
https://www.marketwatch.com/story/mortgage-rates-surpassed-4-5-heres-what-home-buyers-need-to-know-11648735667
Federal Reserve issues warning over “brewing U.S. housing bubble”
https://www.cbsnews.com/news/housing-bubble-2022-warning-federal-reserve/
The economic shock hitting the housing market just got bigger
https://fortune.com/2022/04/03/housing-market-mortgage-rate-shock-gets-bigger/amp/
US mortgage rates climb steeply, slowing housing boom
https://www.aljazeera.com/economy/2022/3/31/us-mortgage-rates-climb-steeply
Barry Habib’s Market Insights and More Educational Links
https://www.politico.com/news/2022/03/29/federal-reserve-recession-inflation-rates-00021119
DISCLAIMER: Information on this page does NOT constitute financial advice.
