Does an Impending Recession Hurt the Housing Market?

Dated: September 1 2022

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Does an Impending Recession Hurt the Housing Market?

The word recession is enough to send chills down anyone’s spine, especially homeowners and homebuyers.

What will happen to the housing market? Will we see another housing crisis like 2007?

Fortunately, the answer is ‘no, we will not see another housing crisis.’ Here’s why.

 

Home Prices are Elevated

If you’ve monitored the housing industry over the last couple of years, you know home prices are wildly inflated. That was due to the crazy high demand and much lower supply. It was a natural turn of events.

Buyers were desperate to buy homes and willing to pay more. Some even spent more than a home’s value, which drove up the market prices.

If the recession happens and home prices fall, they won’t fall to levels as we saw during the housing crisis, causing homeowners to be upside down on their loans. Instead, the values may fall back to where they ‘should’ be, which doesn’t leave most people owing more than their home’s value.

 

Supply is Still Low

A recession may cause lower demand for housing, which isn’t bad. Right now, demand still exceeds supply, keeping prices elevated. If demand falls, it will equal the supply or close to it, evening out the playing field.

When supply is much lower than demand, it causes problems. In this case, the recession could help the housing inventory, giving the market a larger supply and equalizing the market.

 

It Would Still be a Good Market for Buyers

You might wonder, should you hold off on buying a home if a recession hits?

In some cases, homeowners should hold off on buying a home, but today’s recession is different. The Fed normally floods the economy with money to stop the recession. This time, however, the recession is a good thing because it will stop the crazy inflation we’ve had the last year.

So should buyers buy a house in a recession?

Here’s what to consider:

  • Do you have the money to put down? A decent down payment is the key to loan approval today.
  • Do you plan to stay in the home for at least a few years, so the market has time to settle?
  • Is your employment steady, or are you at risk of losing your job?
  • Do you qualify for an affordable interest rate?

 

Final Thoughts

A recession isn’t necessarily a bad thing for the real estate market. On the contrary, it might make housing prices more affordable for more buyers and keep the bidding wars to a minimum.
If you’re in a good financial position and know you want to invest in a home for at least a few years, this could be a great time to get into the market without the excessive demand driving prices too high.

If you’re ready to explore your options for buying a home, contact me today. Together let’s create a plan to help you achieve your dreams of owning a home.

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Kevin Pedraza

Kevin has a natural propensity for customer service and intuitively knows what type of property his client is looking for, even if they haven’t eloquently described it. Kevin's ability to observ....

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