Here are three things that are almost always true about a recession.
“How does a recession impact the real estate market?” This is a question I’ve been getting a lot lately. We can define a recession as two consecutive quarters of a slowing economy, and in a recession, we always see three things happen: The unemployment rate goes up, The mortgage rates decrease, and housing stays strong. Today I’m going to explain why each of these things happen when the economy contracts:
- The unemployment rate increases. During the beginning of the pandemic, the unemployment rate skyrocketed. As things improved, that rate dropped to nearly zero. That low unemployment rate is a telltale sign that we could soon enter a recession. During a recession, there will be pressure on that rate to increase.
“Homeowners have nothing to worry about. ” - Mortgage rates decrease. The sentiment right now is that mortgage rates are increasing to historic levels. In reality, 6% or 7% are relatively low rates when compared to the entire history of mortgage rates. As inflation drops down in the second or third quarter of the next year, however, we can expect to see these rates lower.
- The housing market stays strong. This has held true in nearly every example of a recession except for 2008. That debacle with housing prices was a unique situation and a topic for another day. In every other recession in recorded history, however, we actually saw appreciation in the market. Mainly due to our incredibly low inventory, we are currently in a great market for homeowners.
If you’d like to talk about this or any other topic, I’d love to hear your suggestions. Feel free to call, text, or email me. I’d be happy to learn how I could best serve you.
