What Does A Recession Mean for the Housing Market?
The Federal Reserve has begun an aggressive campaign to moderate demand and tame prices in an attempt to curb the US from entering into a recession. With inflation at its highest in 40 years, borrowing costs surging, and stocks taking a beating, many Americans are becoming increasingly concerned about a possible recession.
Naturally, this brings up fears and questions about how it might affect our lives, our jobs, and business overall. One concern many Americans have is: how will this affect the housing market?
According to Mortgage Specialists: “Throughout history, during a recessionary period, interest rates go up at the beginning of the recession. But in order to come out of a recession, interest rates are lowered and stimulate the economy moving forward.”
Here’s what happened to mortgage rates during each recession going back to the 1980s:
As the chart shows, historically, each time the economy slowed down, mortgage rates decreases. And while history doesn’t always repeat itself, we can learn from it. While a recession, or economic slowdown, needs to happen to taper inflation, it may help the housing market as historically it has meant that the cost to finance a home has gone down.
Owner/Broker, Steve Reynolds, explains: “We are now experiencing a soft landing recession due to the Federal Reserve manipulating the rates. There is no downward pressure on the central banking system, in contrast to 2007-08 when there were subprime mortgages without sufficient amounts of money down. Today our local real estate market remains strong since loan-to-value ratios have been corrected and many homeowners have a higher amount of equity in their homes.”
While no one knows exactly what the future holds, you can make the right decision by working with a trusted real estate professional to get expert advice on what’s happening in the housing market.
Call us today to learn more: (518) 418-7747