Blog - The Lending Coach

Why Home Values Might Surprise You During a Recession

May 26, 2025 / Tom Bonetto / 0 Comments

the word recession spelled out with scrabble letters

With whispers of an impending recession, many homeowners and prospective buyers are bracing for a potential hit to home values. It’s a natural concern—economic downturns often bring visions of plummeting markets and financial uncertainty.

But what if the data tells a different story?

potted succulent plants on the bookshelf

Contrary to popular belief, home values have historically performed remarkably well through the vast majority of recessions.

Let’s dive into why this counterintuitive trend holds true and what it means for today’s housing market.

The Recession-Home Value Myth

When we think of recessions, we often picture widespread economic turmoil: job losses, stock market dips, and declining asset values. It’s easy to assume that real estate, one of the largest investments for most households, would take a significant hit.

After all, if people are tightening their belts, wouldn’t fewer buyers mean lower home prices? Not necessarily:

As you can see, the data paints a surprising picture.

According to the graph above, home values have not only remained stable but often appreciated during most recessionary periods.

This challenges the conventional wisdom and prompts a closer look at the factors driving this resilience.

Why Do Home Values Hold Up?

Several key dynamics help explain why home values tend to weather recessions better than expected:

Limited Housing Supply: During recessions, home construction often slows as builders pull back due to economic uncertainty. At the same time, homeowners may delay selling, opting to stay put rather than risk entering a volatile market. This reduced supply can prop up home prices, even when demand softens.
Low Interest Rates: Recessions typically prompt central banks, like the Federal Reserve, to lower interest rates to stimulate the economy. Lower rates make mortgages more affordable, encouraging buyers to enter the market and supporting home price stability.
Real Estate as a Safe Haven: In times of economic uncertainty, investors and individuals often turn to tangible assets like real estate for stability. Unlike stocks or other volatile investments, homes provide both utility (a place to live) and long-term value, making them a preferred choice during turbulent times.
Sticky Home Prices: Home prices are famously “sticky” downward. Sellers are often reluctant to lower their asking prices significantly, especially if they’re not in financial distress. This resistance to price cuts can keep values elevated, even in a slower market.

What the Data Shows

The MBS Highway graph highlights several recessionary periods over recent decades, overlaying them with home price trends. In most cases, home values either continued to rise or experienced only modest declines before quickly recovering. For example:

Early 1990s Recession: Home prices remained relatively flat despite economic challenges and began appreciating soon after.
Early 2000s Recession: Home values continued their upward trajectory following the dot-com bust with minimal disruption.
Great Recession (2007-2009): This is the notable exception, where a housing bubble fueled by lax lending standards led to a sharp decline in home values. However, this was an outlier driven by unique circumstances, not a typical recessionary outcome.

Since the Great Recession, home prices have shown even greater resilience, supported by tighter lending standards, low inventory, and strong demand.

Even during the brief but sharp economic contraction of 2020 caused by the COVID-19 pandemic, home values surged as buyers sought more space and capitalized on historically low mortgage rates.

What This Means for Today

As fears of a 2025 recession loom, the historical data offers a dose of reassurance for homeowners and investors.

While no two recessions are identical, the evidence suggests that home values are more likely to hold steady—or even grow—than to crash.

Here’s why this matters:

For Homeowners: If you’re worried about your home’s value, history suggests you may not need to panic. Real estate’s long-term stability makes it a reliable asset, even in tough times.
For Buyers: A recession could bring opportunities, such as lower interest rates or slightly less competition in the market. If inventory remains tight, waiting too long might mean missing out on a good deal.
For Investors: Real estate remains a compelling hedge against economic uncertainty, offering both stability and potential for appreciation.

A Word of Caution

While the data is encouraging, it’s important to acknowledge that past performance isn’t a guaranteed predictor of future results.

The Great Recession showed that extraordinary circumstances—like a housing bubble—can lead to significant declines. Additionally, local market conditions vary widely.

Areas with strong job markets and limited inventory are likely to fare better than oversupplied or economically struggling regions.

Stay Informed, Stay Ahead

The housing market is complex, but understanding the data can help you make informed decisions. The graph from MBS Highway is a powerful reminder that recessions don’t automatically spell doom for home values.

By staying in the know, you can confidently navigate economic shifts.

Whether you’re a homeowner, buyer, or investor, keep an eye on key indicators like inventory levels, interest rates, and local market trends.

Reach out to me for more…

And don’t let recession fears cloud your judgment—real estate has repeatedly proven that it’s built to withstand the storm.

Tariffs, Inflation, The Fed…and Mortgage Rates

May 12, 2025 / Tom Bonetto

tariffs and trade usa and china relations

There’s a good deal of uncertainty surrounding tariffs and what they will do to the economy – especially mortgage rates.

In today’s global economy, tariffs—taxes on imported goods—are an important tool used by governments to influence trade and protect domestic industries. When a country, such as the United States, imposes tariffs on products from other nations, it can affect not just the prices of those goods but also the broader economy.

brown and black beans in clear glass jar

One of the key areas impacted by tariffs is inflation, which is closely monitored and managed by the Federal Reserve.

Understanding how tariffs influence inflation helps explain how they complicate the Federal Reserve’s role in keeping the economy stable.

What Are Tariffs and Why Are They Used?

Tariffs are used by governments to make imported goods more expensive, with the goal of encouraging consumers to buy domestically produced products instead.

For example, if the U.S. imposes a tariff on foreign-made steel, American steel becomes more competitive in price.

While this might help U.S. manufacturers, it also raises the cost of materials for other businesses that rely on imported goods, leading to higher prices for finished products.

Tariffs and Consumer Prices

When companies have to pay more to import goods, those increased costs often get passed along to consumers.

This leads to higher prices for everyday items like electronics, clothing, and food. These price increases contribute to inflation, which is the general rise in the cost of living.

Tariffs can also raise production costs for businesses, which can then slow economic growth or cause companies to cut jobs to balance their budgets.

What Is Inflation and Why Does It Matter?

Inflation refers to the rate at which prices for goods and services rise over time. A low-to-moderate level of inflation is normal and can signal a healthy economy.

However, when inflation rises too quickly, it can erode purchasing power and lead to uncertainty in the market. People may struggle to afford necessities, and businesses might delay investment. That’s why inflation control is one of the primary responsibilities of the Federal Reserve.

You can find out more about inflation and mortgage rates here…

The Role of the Federal Reserve

One of the Fed’s key jobs is to manage inflation and promote stable prices by adjusting interest rates and using other monetary policy tools.

When inflation rises, the Fed often raises interest rates to slow down spending and borrowing.

Conversely, when inflation is too low, the Fed may lower interest rates to stimulate the economy. Tariffs can interfere with this balance by introducing unexpected upward pressure on prices.

How Tariffs Complicate the Fed’s Decisions

When inflation is driven by tariffs rather than strong consumer demand, it creates a challenge for the Federal Reserve. If the Fed raises interest rates in response to tariff-driven inflation, it could unintentionally slow the economy or increase unemployment.

However, if it does nothing, inflation might continue to rise. This puts the Fed in a difficult position, having to choose between fighting inflation or supporting growth—two goals that can conflict when tariffs are involved.

Real-World Examples

Recent U.S. tariffs on Chinese goods and other imports have demonstrated these effects. Following the trade war between the U.S. and China, prices rose for goods like washing machines, electronics, and industrial materials.

Inflation increased in some sectors, and businesses adjusted by either raising prices or cutting costs.

The Federal Reserve had to carefully analyze these developments when making decisions about interest rates and monetary policy during that time.

Inflation, Mortgage Rates, and Treasury Yields

Mortgage rates are primarily driven by inflation, which erodes the buying power of the fixed return that a mortgage holder receives. When inflation rises, lenders demand a higher interest rate to offset the more rapid erosion of their buying power.

Fixed mortgage rates and Treasury yields tend to move together because fixed-income investors compare the returns they can get on government and mortgage-backed securities.

Investors compare yields on long-term Treasuries to mortgage-backed securities and corporate bonds. All bond yields (including mortgage backed securities) are affected by Treasury yields, because they compete for the same type of investor.

Mortgages, in turn, offer a higher return for more risk. Investors purchase securities backed by the value of the home loans—so-called mortgage-backed securities.

roll of american dollar banknotes tightened with band

When Treasury yields rise, investors in mortgage-backed securities demand higher rates. They want compensation for the greater risk.

What Really Causes Rates to Rise and Fall?

Mortgage rates are determined by a complex interaction of economic factors, such as the level and direction of the bond market, including 10-year Treasury yields; the Federal Reserve’s current monetary policy, especially as it relates to funding government-backed mortgages; and competition between lenders and across loan types.

Because fluctuations can be caused by any number of these at once, it’s generally difficult to attribute the change to any one factor.

Although in our current situation, inflation (and the Fed’s fear of it) is the number one cause. When this is coupled with the large increase in government spending and tariff uncertainty, you see a double dose of fear in the markets.

Conclusion

These are some very interesting economic times, indeed…and not easy for monetary policy specialists.

The Fed must carefully evaluate whether inflation is being driven by consumer demand or by policy decisions like tariffs.

As global trade tensions continue to influence markets, the relationship between tariffs, inflation, and the Federal Reserve remains a critical area of economic concern – and these will all impact mortgage rates.

All of these factors are causing uncertainty in the marketplace, and have negatively impacted mortgage rates in the last month. With that said, inflation really is the key driver…and if those readings come down, mortgage rates will, too.

Do reach out to me to discuss what’s happening in the marketplace and how you might be able to take advantage!

MARKET UPDATE: Economic, Real Estate, and Mortgage Data – Outlook for May 2025

May 5, 2025 / Tom Bonetto

Let’s take a look at what’s happening in the economic marketplace through the end of April 2025…and how this might impact real estate sales and mortgage rates moving forward.

Economic updates through April of this year revealed that the labor market showed some weakness, first quarter economic growth contracted, the Fed’s preferred inflation measure slowed, and home prices continued their upward trajectory.

Here are more details on these key developments…

April Jobs Report: Looking Beyond the Headlines

April brought a surprise with 177,000 new jobs added – well above the expected 130,000, according to the Bureau of Labor Statistics (BLS). The unemployment rate remained steady at 4.2%.

What’s the bottom line? While April’s headline number appears strong, it’s important to remember these figures will be revised in coming months. Recent history suggests caution – the first three months of 2025 all saw significant downward revisions (January: -32K, February: -49K, March: -43K). If April follows this pattern, the actual job growth may fall below forecasts.

In addition, the BLS birth/death model, which estimates small business job creation, added a whopping 393,000 jobs in April. This sharply contradicts ADP’s report showing small businesses added just 11,000 jobs – suggesting potential overestimation.

Another concerning trend is the average unemployment duration increased to 23.2 weeks – the highest since December. This aligns with the ongoing elevation in weekly Continuing Jobless Claims, pointing to persistent challenges in the labor market.

Labor market weakness is a recessionary sign, potentially leading the Federal Reserve to cut its Federal Funds Rate.

Private Payrolls Miss Expectations

April’s private sector job growth came in at just 62,000 positions, falling well short of the anticipated 115,000, according to ADP data. This represents the slowest hiring pace since July, as economic uncertainty appears to be influencing employer decisions. Notably, large companies (500+ employees) added only 12,000 jobs – a significant drop from previous months.

Looking at industry breakdown, leisure/hospitality led with 27,000 new positions, followed by trade/transportation/utilities with 21,000 jobs. Both sectors face headwinds, however, with tourism already slowing and goods shipments expected to decline due to tariff impacts.

Wage growth remained steady, though it ticked down slightly to 4.5% (from 4.6%) for existing employees. Job-changers experienced a modest increase to 6.9% (from 6.7%).

What’s the bottom line? “Unease is the word of the day,” notes ADP Chief Economist Nela Richardson. “Employers are trying to reconcile policy and consumer uncertainty with a run of mostly positive economic data. It can be difficult to make hiring decisions in such an environment.”

Again, this is a recessionary sign, potentially spurring the Federal Reserve to cut its Federal Funds Rate.

The Fed’s Preferred Inflation Measure Shows Progress

Good news on inflation! The latest Personal Consumption Index (PCE) report reveals headline inflation remained flat month-over-month while dropping to 2.3% year-over-year (down from 2.7%). Core PCE – the Fed’s favorite inflation gauge – is now at 2.6%, moving closer to their 2% target.

Meanwhile, consumer spending surged 0.7% in March, possibly as shoppers rushed to beat upcoming tariffs.

What’s the bottom line? Shelter costs remain key to reaching the Fed’s 2% goal, making up 18% of Core PCE. While these costs have stayed stubbornly high in official data, real-time rental reports from sources like Apartment List and CoreLogic show softer trends. As PCE catches up to these real-world rental conditions, we should see inflation numbers continue to improve. When inflation numbers start to drop, mortgage rates will follow.

Home Prices Continue Strong Nationwide Growth

The Case-Shiller Home Price Index – widely recognized as the gold standard for tracking home values – reported a 0.3% seasonally-adjusted increase from January to February.

Year-over-year, national home prices grew by 3.9% in February, slightly down from January’s 4.1% gain. Major cities showed even stronger performance, with the 10-city composite rising 5.2% and the 20-city index up 4.5% compared to last year, demonstrating that urban markets are outpacing the national average.

In a separate report, the FHFA House Price Index showed a modest 0.1% monthly increase and a 3.9% yearly gain. Unlike Case-Shiller, FHFA’s data only tracks homes with conventional mortgages, excluding cash purchases and jumbo loans.

What’s the bottom line? Case-Shiller reports that “home prices have shown notable resilience” despite affordability challenges and high interest rates. This resilience means homeownership continues to be a powerful wealth-building tool. For perspective: if you own a $600,000 home that appreciates by 4% annually, you’d gain $24,000 in equity in just one year – an impressive return on your investment.

Other Economic Highlights

U.S. Economy Contracts: The U.S. economy declined 0.3% in Q1 2025, according to the Bureau of Economic Analysis’ advanced GDP report. This contraction primarily stemmed from increased imports (ahead of tariff implementation) and reduced government spending, partially offset by growth in investment, consumer spending and exports.

wallet with coins banknotes and credit card for payment

Housing Market Activity Improves: Pending Home Sales (signed contracts on existing homes) jumped 6.1% from February to March – marking two consecutive monthly increases. NAR Chief Economist Lawrence Yun attributes this surge to lower mortgage rates in March and suggests it “implies a sizable build-up of potential home buyers.”

Labor Sector Weakening: Initial Jobless Claims hit their highest level since February at 241,000, while Continuing Claims jumped by 83,000 to 1.916 million – the highest since November 2021. In addition, job openings fell to 7.192 million in March, continuing their decline from 2022 peaks. Remote work may inflate these figures through multi-state postings, potentially concealing even fewer actual openings. The job vacancies to unemployed ratio has dropped from 2:1 in 2022 to 1:1, signaling deteriorating labor market conditions.

What Does All of This Mean?

It does appear that economic activity is slowing – and it really has been over the last 6+ months. Most of these indicators are pointing toward a recession…which actually is good news for home buyers and home owners. Mortgage rages generally go down during recessions and home values usually go up during these periods.

Please do reach out to me for more, as I’d be glad to go through these data points with you and help put a purchase plan together!

The Cost of Waiting Tool – Available Now!

March 31, 2025 / Tom Bonetto

Attention real estate agents and investors…I have a new tool available for you to share with you or your clients who are waiting and trying to “time the market”.

So many consumers have been delaying a home purchase as they hold out for interest rates or home prices to drop.

My reporting tool helps demonstrate how delaying a purchase for even a year or two could cost buyers thousands in appreciation, amortization, equity and more.

The Report

For example, if a buyer opted to wait on a $800K purchase, thinking that mortgage rates would drop by nearly three-quarters of a percent (from 6.75% to 6.125%).

In fact, they would actually only save $74/month in their mortgage payment…but would miss out on over $35,000 in appreciation over that year.

Secondly, they could easily purchase now and refinance in a year – and still have a net benefit of buying now of over $30,000!

Here are the specifics:

This Cost of Waiting tool will help show you or your buyers how delaying their purchase could have more of an impact on their long-term wealth than they realize.

Reach Out to Me

I can provide this information to you at any time, so please reach out to me and find out more. You can schedule a time to go through this tool with me here…as it would be my pleasure to help you!

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

Mortgage Rate History | Where Are We in Relation to the Norm?

March 24, 2025 / Tom Bonetto

For many homebuyers, the last few years have felt like a perfect storm of trials – rising home prices and climbing mortgage rates limiting affordability.

Many people are now wondering if 2025 will finally reverse the trend.

house keys a cup of coffee and measurement tools

While there’s no magical analysis tool to help to navigate market shifts, a look back at mortgage rate history can offer clues—and maybe even some hope for those waiting to make their move.

While the history of mortgage rates provides some good context, it’s important to understand that borrowers with healthy credit profiles and strong finances often get mortgage rates well below the industry norm.

A quick spoiler…the long term average for the 30-Year mortgage is just under 8%.

You can find out more here from Peter Miller and The Mortgage Reports…

Historical Mortgage Rates Graph

Current rates are more than double their all-time low of 2.65% (reached in January 2021). But if we take a step back and look at the history of mortgage rates, they’re still close to the historic average.

Freddie Mac — the main industry source for mortgage rates — has been keeping records since 1971. Between April 1971 and March 2025, 30-year fixed-rate mortgages averaged 7.73%.

The 30-year Fixed-Rate Mortgage Chart

Understanding mortgage rates history helps frame current conditions and shows how today’s rates compare to the historic mortgage rates averages.

Here’s how average 30-year rates have changed from year to year over the past five decades:

A Look at the Last 2+ Years

Mortgage interest rates dropped to historic lows during the COVID pandemic, actually falling below 3% in 2020 and 2021 due to crisis related moves by the Federal Reserve. These record lows gave way to a dramatic reversal as economic conditions changed.

By 2022, inflation surged, pushing mortgage interest rates to their highest levels in twenty years! Freddie Mac reported the average 30-year rate climbing from 3.22% in January 2022 to a peak of 7.08% in October, marking a significant shift in borrowing costs.

As we look back on 2024, rates have shown some fluctuation, including a temporary dip in September, but have yet to deliver consistent declines.

While the Federal Reserve implemented three rate cuts in 2024, its decision to hold rates steady in its first meeting of 2025 has tempered expectations.

However, optimism persists as many continue to expect potential rate reductions later in the year, especially with another Fed meeting approaching later this month. You can find out more regarding the Federal Reserve and mortgage rates here…

Historic Mortgage Rates: The Average

The long-term average for mortgage rates is just under 8 percent…and that’s according to Freddie Mac records going back to 1971.

But historical mortgage rates show that rates can fluctuate significantly from year to year, and some years have seen much bigger moves than others.

Will Rates Eventually Go Back Down?

Experts predict further declines, with the Mortgage Bankers Association and Wells Fargo forecasting the 30-year fixed mortgage rate could fall to between 5.5% and 6.0% by the end of this year.

two red balloons with percentage symbols on white background

More importantly, you can find my 2025 forecast here…

While the Federal Reserve held rates steady in its January meeting, the average 30-year fixed rate has edged lower in recent weeks, creating a more favorable market for buyers as borrowing costs ease.

As a borrower, it doesn’t make much sense to try to time your rate in this market – and you can find more on that here…

My best advice is to make that purchase when you’re financially ready and can afford the home you want — regardless of current interest rates.

Remember that you’re not stuck with your mortgage rate forever. If rates drop significantly, homeowners can always refinance later on to cut costs. Remember the key adage – “Marry the House but Date the Rate”…

In Conclusion

If you find the house that you are looking for, I recommend that you make that purchase, regardless of the interest rate.

Homes are appreciating at around 4% annually, so the longer you wait, the more expensive that home will be down the road. Also, it’s important to remember that average mortgage rates are only a general benchmark.

If you have good credit and strong personal finances, there’s a good chance you’ll get a lower rate than what you see in the news. So reach out to me to discuss your next steps!

The Lending Coach