If you have been paying attention to the real estate headlines, you are probably aware that there seems to be a lot of confusion when it comes to buying or selling a home right now. It can be difficult to know what and who to believe when everyone seems to have a different opinion. The
truth is that we can only predict the future by looking at the past.
Right now, indicators are pointing us toward a potential recession and many people are concerned about how a recession might affect the housing market. While history does not always repeat itself, it is helpful to have an idea of what to expect. What we do know is that what
determines how the real estate market is affected by a recession is the impact of demand and affordability.
Recessions happen when there is a widespread drop in spending. This is usually due to a lack of consumer confidence and loss of business. Traditionally, the definition of a recession is two quarters or six months of economic decline and we are already seeing that.
It is important to remember that a recession doesn’t necessarily mean that there will be a recession in home prices. Historically, what we see is that housing values typically increase during a recession. It may be a little slower, but they do still appreciate. If we go back to 1980, home prices appreciated in four of the six recessions.
Also, if we take a look at mortgage rates in previous times during economic decline, rates decreased. The federal reserve usually lowers interest rates during a recession to help make the cost of borrowing more affordable. This can be a good time for homeowners to refinance at a lower rate.
Overall, the housing market is still stable. Inventory remains tight with many homes still commanding full list price. The bottom line is that even during a recession, real estate is still a sound investment. Homes are still likely to appreciate during a recession and mortgage rates are likely to go down which is great news for homebuyers and for some homeowners.
If you have been wondering about how to proceed with your real estate plans in today's market, it is best to work with an experienced real estate professional who can keep you up to date and provide guidance with your specific concerns. Give us a call today, we will be happy to help you in any way that we can.
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