Some of you have told me that your buyers are concerned with how a recession might impact the housing market. ATTOM Data Solutions, a leading real estate data provider reviewed the impact of the last 5 recessions on the nation’s housing market. Three times home prices continued to increase and only twice did home prices drop during a recession. In 1990 home prices dropped by less than 1% during that recession.
But, of course everyone still remembers the last recession that saw housing prices really drop. However, that recession was caused by the housing sector as way too many new homes were built and we lent trillions of dollars to anyone and everyone with a pulse.
This time around home builders are building nearly 50% fewer homes than they did before the last recession. And as we all know credit and underwriting guidelines are much tighter today than they were 12 years ago. Thus, housing will NOT be causing the next recession.
Thus, I don’t see a recession negatively impacting home prices at a national level or at a local level. I am honestly more concerned that record low interest rates (even lower than what we see today) will cause demand for housing to increase. Thus, home prices may start appreciating by 8% to 10% a year again even during a national recession.
Finally, “I hear prospective buyers talk about timing the market and waiting for the next housing slump. There are a lot of reasons why trying to time the market doesn’t work,” says Brian Davis, director of education for SparkRental. I agree! Financial advisors say the same thing about the stock market—don’t try to time the market. Instead it’s about TIME IN THE MARKET! This is true for real estate too.