According to a recent research of Wall Street Journalthe percentage of economists who believe we will see a recession in the next 12 months is growing. When I surveyed them in July 2021, only 12% of the economists consulted thought there would already be a recession. But in July of this year, when surveyed, 49% believe we will see a recession in the next 12 months.
And as more talk of recession spreads, one concern many people have is: should i delay my plans to buy a house if there's a recession?
I think understanding the dynamics of the real estate market in past recessions will help us understand what could happen.
Below is historical data to show what happened in the real estate sector during previous recessions to help prove why you shouldn't be afraid of what a recession would mean for the real estate market today.
A recession doesn't mean falling house prices. To show that house prices don't fall every time there's a recessionIt is useful to refer to the historical data. As the graph below illustrates, looking at recessions since 1980, house prices have appreciated in four of the last six recessions. So, historically, when the economy slows down, it doesn't mean that house values will fall.
Recession doesn't mean falling property prices
Price changes in the last 6 American recessions
Most people remember the housing crisis of 2008 (the larger of the two red bars in the chart above) and thinks that another recession would repeat what happened then.
But the real estate market is not about to collapse. The fundamentals are very different today than they were in 2008. So don't assume that we're following the same path.
A recession means falling mortgage rates. A research also helps paint the picture of how a recession can affect the cost of financing a home. As the graph below shows, historically, every time the economy has slowed down, the mortgage rates decreased.
Recession means falling mortgage interest rates
Interest rate variation from its highest point in the last 6 American recessions
Fortune explains that mortgage rates usually fall during an economic downturn:
"In the last five recessions, mortgage rates have fallen by an average of 1.8 percentage points from their peak during the recession to their lowest point. And in many cases, they continued to fall after the fact, because it takes time to turn things around, even when the recession is technically over."
And although history doesn't always repeat itself, we can learn and find comfort in historical data.
Read also: Real estate is a great hedge against the impact of rising inflation
No doubt everyone remembers what happened to the real estate market in 2008. But you don't have to fear the word recession if you are planning to buy or sell a house. According to historical data, in most recessions, house price gains have remained strong and mortgage rates have fallen.
If you're thinking of buying or selling a home, let's connect so you can get expert advice on what's happening in the real estate market and what it means for your home ownership goals.
Any doubts?
Now that we've explained to you that all the signs show that we're not in a real estate bubble, you can consider investing in vacation homes in Orlando. To make the most of all the tips we've given you and go even deeper, you can talk directly to our relationship agents. They are always happy to talk to you to answer any questions you may have about investing in Florida.
In this article, we've covered the topic of the behavior of the real estate market during recessions because it's interesting for those looking to invest in Florida. If you would like to read more content like the one in this article, just stay tuned to our blog.
Did you like the article? Keep an eye on our blog! Looking to live or invest in real estate in Florida? Check out the list of houses for sale in Florida that we've selected for you!
|
Getting your Trinity Audio player ready...
|
