The thing every homeowner today needs to understand is that a recession does not equal a housing crisis. Cervone Deegan + Associates knows that with the long ongoing increase in home prices, low mortgage rates, tight inventory and general inflation some experts warn that we could be heading towards a recession but if that happens, this economic slowdown does not mean homes will lose value.
The National Bureau of Economic Research defines a recession as: “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.”
To help give an idea of how home prices are not always affected during recessions we can refer to some historical data. In the past 40 years there have been 6 recessions in the United States. During the recessions in 1980, 1981, 2001 and 2020 homes had appreciated in value while only in 1991 and 2008 did they depreciate. Also, during the recession of the early 1990’s home prices dropped by less than 2%. Everyone recalls the recession of 2008 as it was most recent and may feel that the same thing may happen again. However, the market back then was very different from things today. For one, lenders made artificial demand by loosening up necessary qualifications for mortgages where many obtained them when they shouldn't have in the first place. Additionally, many homeowners were using their homes like personal ATM’s and pulling out all of their equity to purchase high priced items like vehicles, boats or even second homes. When prices declined they found themselves underwater which led to foreclosure. The large amount of foreclosures just fueled the decline of home prices.
Ultimately if you examine the data, should we be heading towards a recession the history proves that it does not equal a housing crisis.