What Does A Recession Mean for the Housing Market?

by Brooks Reynolds on July 12, 2022

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