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Housing Market During A Recession: How Is It Affected?

Wednesday, September 14, 2022   /   by Addison Cassady

Housing Market During A Recession: How Is It Affected?

Housing Market During A Recession: How Is It Affected?

Key Takeaways:

· A recession can have a profound impact on the housing market. Home sales usually drop during an economic downturn.

· Home prices may also drop, which could be good for buyers but not sellers.

· Taking advice from an experienced real estate agent will help you navigate these waters.

· Every recession is different, so it's tough to predict what will happen next in the housing market.

· If you're considering buying/selling a property during a recession, consult a real estate agent to get the most accurate information about what to expect.


The housing market is often one of the sectors most impacted by a recession. Home prices and sales usually peak before the overall economy begins to contract. The effects of a recession on the housing market can be seen in both the demand and supply sides of the market.

On the demand side, a recessionary economy usually decreases consumer confidence, leading to fewer people buying homes. On the supply side, a recession can lead to builders cutting back on new home construction as demand for homes decreases. This can further exacerbate the decrease in home prices typically seen during a recession.

During the Great Recession, home prices peaked in 2006 and then began to decline sharply in 2007. Home prices continued to fall throughout the recession, bottoming out in early 2012. It is worth noting that the housing market is not always affected similarly during a recession.

Read more: Home Prices During a Recession

What Does Recession Mean?

A recession, in simple words, means "a significant decline in economic activity lasting more to 12 months," according to the researchers. A recession is typically characterized by decreased gross domestic product (GDP), higher unemployment, and lower levels of personal income and business profits.

The U.S. economy has experienced seven recessions since World War II, the most recent occurring from December 2007 to June 2009.

You can use several economic indicators to determine whether or not an economy is in a recession.

The most common indicator is Gross Domestic Product (GDP), which measures the value of all goods and services produced in an economy. If GDP growth slows down or contracts for two consecutive quarters, this is generally considered a recession.

Other indicators often used to determine whether an economy is in a recession include industrial production, employment, and retail sales. Suppose these indicators are all contracting or growing at a very slow rate. In that case, its likely that the economy is in a recession.

What Would a Recession Mean for the Housing Market?

The housing market is incredibly important to the economy's overall health and closely linked to economic activity.

A recession would likely have a negative impact on the housing market, as fewer people would be able to afford a home, and more people would default on their mortgages.

This could lead to a decrease in home prices, further reducing demand for homes.

Should You Buy Property in Recession?

Buying a property during a recession can be profitable, as prices are likely to be lower than during boom times. However, you should only do so if you have the financial resources to weather any storm that may come.

If you're thinking of buying property during a recession, there are a few things you should keep in mind:

· Make sure you have a stable job or another source of income.

· Have a large down payment saved up, so you're not as affected by any potential drop in property values.

· Choose an estate that is likely to appreciate in value over time, even if it takes longer during a recession.

· Be prepared for a longer timeline when finding a buyer if you need to sell the property during a recession.

· Work with a professional estate agent who knows how to navigate the market during tough times.

With these factors in mind, you can still come ahead financially even if a recession hits the housing market. Just be sure to do your research & be prepared for anything that might come your way.

Should You Sell Property in Recession?

Should you wait to sell your property until the market improves, or should you try to get rid of your property while prices are low?

The answer to this question depends on several factors, including your financial situation and your plans for the future. If you need to sell your property for financial reasons, then it may be best to do so now rather than waiting for the market to improve. However, if you're not in a hurry to sell, you may want to wait for the market to rebound before putting your property on the market.

· The first thing to remember is that a recession doesn't necessarily mean the housing market will crash.

· Selling your property during a recession is wise, but it's important to pay attention to economic indicators (unemployment rates & consumer confidence.)

· When these numbers start to rise, it could be a sign that the economy is beginning to turn around and that prices may start to rebound.

Does Recession Affect Mortgage Rates?

While a recession can lead to higher mortgage rates, it's not a guarantee. Rates could potentially decrease during a recession if the Federal Reserve lowers the federal funds rate to stimulate the economy. So, while a recession might lead to higher mortgage rates in some cases, there's no guarantee that it will. If you're considering purchasing a home during an economic downturn, consult with a real estate agent and compare mortgage rates from multiple lenders to get the best deal.

The Bottom Line

A recession can have a major impact on the housing market. Home sales usually drop during a recession, as fewer people qualify for mortgages, and many buyers become skittish about making such a large purchase during an economic downturn. This can also lead to prices dropping, which can be good news for buyers but bad news for sellers. But every recession is different, so it's important to have an expert real estate agent by your side!

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Kathy Hames Team | West USA Realty
Kathy Hames
2920 N Litchfield Rd #100
Gooodyear, AZ 85395
602-618-9070

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