How Do Recessions Impact The Housing Market? It’s Not What You Think
With recession concerns making headlines, many homeowners and potential sellers are wondering how an economic downturn might affect their home equity and the broader housing market. Let’s dive into historical trends and data to provide clarity on what typically happens during a recession, so you can make informed decisions about your home.
Home Prices Don’t Always Drop in a Recession
A common misconception is that a recession automatically leads to a housing market crash, with plummeting home prices and eroded equity. The 2008 financial crisis, marked by a sharp decline in home values, is often the go-to example. However, that was an outlier, not the norm.
According to CoreLogic data, in four out of the last six recessions since the 1980s, home prices actually increased. Here’s a look at the trend.
This data suggests that home prices tend to follow their existing trajectory, even during economic slowdowns. As of April 2025, national home prices are rising at a steady, moderate pace. So, if you’re worried about losing equity in a recession, history shows that a crash is unlikely. Instead, your home’s value is more likely to hold steady or continue appreciating, preserving or even growing your equity.
Mortgage Rates Often Decline
While home prices may not take a hit, mortgage rates typically behave differently during recessions. Historical data from the last six recessions shows that mortgage rates declined in every instance.
Lower rates can improve affordability for buyers, potentially increasing demand for homes. For sellers, this could mean a more active market, even in a recession. However, don’t expect ultra-low rates like the 3% seen in recent years—those were exceptional. A modest rate drop could still make your home more attractive to buyers, helping you maintain or maximize your equity.
What This Means for Home Sellers
If a recession is on the horizon, here’s what you need to know as a homeowner or seller:
Your Equity Is Likely Safe: Home prices rarely collapse during recessions, so your home’s value—and the equity you’ve built—is likely to remain stable or grow.
Buyer Demand May Persist: Lower mortgage rates could attract more buyers, keeping the market competitive and supporting your home’s sale price.
Timing Matters: If prices are still rising in your area, selling sooner rather than later could lock in gains before any potential slowdown.
Key Takeaways
Recession fears are understandable, but the housing market has historically been resilient. Home prices typically hold steady or rise, protecting your equity, while falling mortgage rates can stimulate buyer interest. By focusing on these trends, you can approach buying or selling with confidence, regardless of economic uncertainty.
Have questions about how a recession might impact your home’s value or selling plans? Contact us today to discuss your options and get personalized advice for your market.