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Tag: home values

Why Home Values Might Surprise You During a Recession

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:

MBS Highway graph

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
Coins growing plants with small home

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

Hourglass with home in sand

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.

The Lending Coach

Missed Opportunities by Trying to Time the Market | Don’t Wait!

person looking at watch

Those who have been waiting for mortgage rates to come down have missed a huge financial opportunity.

Home prices rose 6% in 2022, 6% in 2023 and 4% so far year-to-date in 2024. 

person holding white ipad on brown wooden table

That means over the last 30 months home prices have risen on average 17% compounded. 

Using a median home price of $350K 30 months ago – if you waited for rates to improve, you would have missed a $60,000 wealth creation opportunity. 

But don’t let those statistics discourage you.  Now’s a very good time to purchase, as appreciation gains look likely for the near future!

What the Experts Are Saying

Wood roof and coins

Case-Shiller’s lead analyst, Brian Luke said “while annual gains have decelerated recently, this may have more to do with 2023 than 2024, as recent performance remains encouraging.  Our home price index has appreciated 4.1% year-to-date, the fasted start in 2 years”

He goes on to talk about the cost of waiting, saying “the waiting game for the possibility of favorable changes in lending rates continues to be costly for potential buyers as home prices march forward.”

Mortgage Rates

Mortgage rates are near 12-month lows – as inflation seems to be coming down and the unemployment rate has moved higher. 

Both of these are potential recession indicators, meaning that the Federal Reserve may cut the Federal Funds rate shortly. You can find out more here…

Pricing Pressure Ahead?

person standing on arrow

As rates move lower, more buyers will become eligible to purchase. In fact, the National Association of Realtors states that for every 1% decline in mortgage rates, 5 million more people can be eligible to buy.

Even if a small fraction of these eligible buyers decides to move forward, it will likely pressure prices higher and shrink the number of available home choices even further. More on that here…

The Bottom Line

Home price appreciation remains strong, despite higher mortgage rates and slightly increasing inventory. 

Home values continue to set new all-time highs, and housing still proves to be one of the best investments out there.  If you’ve been thinking about purchasing, now is a good time to do it!

Do reach out to me and we can strategize about your next purchase or refinance!

The Lending Coach

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.

Consumers Underestimate How Quickly Home Values Rise

You might find this hard to believe, but home prices are rising twice as fast as consumers think they are.  Lack of awareness could be costing home buyers thousands each year they delay their purchase.

Source: Consumers Underestimate How Quickly Home Values Rise

According to Fannie Mae’s monthly National Housing Survey, 41% of surveyed consumers think it would be “difficult” to get a mortgage approved today with some believing that their credit is too poor.  Others think they lack sufficient home equity.  Interestingly, that data shows that these concerns are really unfounded!

Per The Mortgage Reports Newsletter, “today’s market gives the opportunity to buy homes — first-time home buyers, move-up buyers, and real estate investors, too.”

As an example, one year ago, consumers told Fannie Mae that home prices would rise 2.6% over the next twelve months.  Values gained more than twice that, as it happened.

Rising home values are positive returns on investments

In a modest inflationary environment, increases in home prices can be a good thing.  If the price of the home is rising, the homeowner is also increasing their purchasing power, as well as their return on investment.

Historically, if investments are rising and inflation is tempered, the economy is thought to be moving along at a productive and profitable pace.  Everybody has heard the phrase “a rising tide lifts all boats” – and that data shows that’s  where we are most likely headed.   So while the existing homeowners are increasing their purchasing power, the buyers who want to enter the market are also gaining financial strength.  It really is a double whammy for buyers and sellers!

Buyer Education of the Current Situation is Key

There is real opportunity for potential home buyers out there – and Realtors and lenders need to help folks understand the implications of underestimating the rise of housing prices.  Effectively communicating the value of the market is crucial to supporting the needs of potential buyers and sellers.

If done well, there should be plenty of support for the owners looking to upgrade and the new buyers wanting to enter the market for the first time.  Hence, a rising market like this can create opportunities for the entire real estate community, including the new owners.

Product Knowledge is Crucial

Since the election, rates have increased – but have started to moderate over the last few months.  Make sure you have a solid relationship with a lender that has command of all the products to help figure out the best option for you!

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