The economy is a hot topic everywhere you turn, and many are concerned that a recession could be on the horizon this year. This uncertainty has a lot of people questioning how it might affect their home’s value and their ability to buy property.

Let’s explore some historical data to see how the housing market has reacted during each recession since the 1980s. You might find the facts to be quite surprising.

A Recession Doesn’t Mean Home Prices Will Fall

A lot of folks believe that if a recession happens, home prices will plummet like they did in 2008. However, that was an unusual case, not the norm. It was the only instance when the market experienced such a dramatic decline in prices. Since then, we haven't seen anything like it, primarily because overall inventory remains quite low. Even in areas where the number of homes on the market has begun to increase this year, inventory is still much lower than the oversupply that contributed to the housing crash.

According to data from Cotality, which used to be known as CoreLogic, home prices actually increased during four out of the last six recessions.

Don’t assume that a recession will cause home values to take a big hit. The data just doesn’t back that up. Typically, home prices tend to continue on their current path. Right now, across the country, home prices are still increasing, but at a more typical rate.

Mortgage Rates Typically Decline During Recessions

Home prices usually remain stable, but mortgage rates often decrease when the economy slows down. Looking at the data from the last six recessions, we can see that mortgage rates dropped each time.

A recession could lead to lower interest rates. While that might boost your buying power, don't count on seeing rates drop back to that 3% level again.

Bottom Line

The answer to whether we’re heading for a recession is still up in the air, but the chances are increasing. Even so, there’s no need to stress about the impact on the housing market or the value of your home. If we look at historical data, we can see what typically occurs in these situations.

If you're curious about how the current economy is affecting our local market, let's talk.