Are we heading towards a recession? If yes, How will the real estate market be affected?

A recession does not always equal a housing crisis. That’s the one thing that every homeowner needs to know today. Everywhere you look, experts are warning we could be heading toward a recession, and it’s possible they are correct, but even if true, an economic slowdown doesn’t always mean homes will lose value.

“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.”

The National Bureau of Economic Research (NBER) 

To help show that home prices don’t fall every time there’s a recession, take a look at the historical data. There have been six recessions in this country over the past four decades. As the graph below shows, looking at the recessions going all the way back to the 1980s, home prices appreciated four times and depreciated only two times. So, historically, there’s proof that when the economy slows down, it doesn’t mean home values will fall or depreciate.

The first occasion on the graph when home values depreciated was in the early 1990s when home prices dropped by less than 2%. It happened again during the housing crisis in 2008 when home values declined by almost 20%. Most people vividly remember the housing crisis in 2008 and think if we were to fall into a recession that we’d repeat what happened then. But regardless of what the future will bring, we can for sure say that the fundamentals are very different today than they were in 2008.