Recessions can be a challenging time for many, and for homeowners or potential buyers, the big question often is: “What will happen to home prices?” If you’re concerned about how a recession might impact the real estate market, you’re not alone. Many people have similar fears, especially given the uncertainty that recessions bring.
To shed light on this topic, I recently made a video discussing the impact of recessions on home prices, drawing from the data of the last seven recessions. Be sure to check out the video below!
Understanding the Impact of Recessions on Home Prices
One of the most common misconceptions is that home prices always drop during a recession. However, history tells a different story. According to data from Keeping Current Matters, during the last seven recessions, home prices actually increased in five of them. The only significant drops occurred during the recession of 1990-91 and the Great Recession of 2008, which was triggered by a housing market crisis.
Here’s a quick breakdown of what happened to home prices during the last seven recessions:
- 1980: Home prices increased by 6.1%.
- 1981: Home prices increased by 3.5%.
- 1991: Home prices decreased by 1.9%.
- 2001: Home prices increased by 6.6%.
- 2008: Home prices decreased by 19.7%.
- 2020: Home prices increased by 6%.
As you can see, in most cases, home prices either remained stable or increased. The 2008 recession was an outlier because it was directly tied to the housing market, with subprime mortgages and inflated home prices creating a perfect storm.
Why Home Prices Don’t Always Fall During a Recession
The reason home prices don’t always drop during a recession comes down to supply and demand. Even during tough economic times, people still need homes, and when the supply of available homes is low, prices tend to hold steady or even increase. Additionally, interest rates often fall during a recession as the government tries to stimulate the economy, making borrowing more affordable and potentially boosting home sales.
What This Means for Homebuyers and Sellers
If you’re considering buying or selling a home during a recession, it’s important to understand that the market dynamics may not be as bleak as they seem. While it’s natural to be cautious, history shows that real estate can remain a stable investment even during economic downturns.
For those interested in buying or selling in the Charlottesville real estate market, it’s crucial to stay informed and work with a knowledgeable agent who understands local and national trends. Craig Massie Real Estate is here to guide you through the complexities of the market, recession or not.
Be sure to watch my video for a more in-depth discussion on this topic, and feel free to reach out if you have any questions or need personalized advice.
