Excluding the Great Recession, a study of 1,039 state-level recessions since the year 1997 showed that home values remained at the same growth as at other times.
Excluding the great housing recession of the late 2000s, the housing values continued to grow during national and state recessions over the past 25 years, according to a new analysis.
The USA achieved its greater economic expansion of all-time this summer, although growth is slowing. A recent survey sponsored by Zillow and conducted by Pulsenomics LLC found that a panel of housing experts and economists expect the next recession to begin in the third quarter of 2020. Demand for housing is expected to cool during the next recession, but few believe that the housing slowdown will be a significant factor in causing this.
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Analysis of past recessions
As some market observers predict a recession on the horizon, an analysis of recessions in the recent past shows that they generally have a limited effect on the housing market. In the past 23 years, there have been two national recessions - the dotcom crash from March to November 2001 and the Great Recession from December 2007 to June 2009 - and several state or regional recessions.
Home values fell broadly across the country during the Great Recession, but in most other cases annual home value growth remained positive.
Excluding the Great Recession, there have been 1,039 cases since 1997 of states in recession during a given month. Annual housing value appreciation was positive 81% of the time in those months - a rate identical to that in months when the states were in economic expansion. Appreciation averaged 4.6% during economic growth and 4% during recessions. This indicates that while recessions have an impact on the housing market, the widespread collapse in home values during the Great Recession is a point outside the curve.
The real estate market is simply much less risky than it was 15 years ago
"The housing crash during the Great Recession left a lasting impression on our collective memory," said Zillow economist Jeff Tucker. "But as we look ahead to the next recession, it is important to recognize how unusual the conditions that caused the last one were and what is different about the housing market today. Instead of abundant housing, we have a lack of supplies for new homes. Instead of borrowers taking on adjustable rate mortgages, we have buyers with genuine credit scores realizing predictable 30-year fixed rate mortgages. The housing market is simply much less risky than it was 15 years ago, and our experience in recent local recessions shows how home prices can withstand normal economic winds.
As an example, several states with large energy sectors - Alaska, Louisiana, North Dakota, Oklahoma, and Wyoming - suffered local recessions starting in 2015 when oil prices fell dramatically. Home value growth was positive year over year in all five states, and only Alaska turned negative month over month during that period - the largest monthly loss in value for the average home in Alaska was $700.
Nationwide, annual housing value growth averaged 4.3% during these recessionary months, compared to average growth of 5.2% during the economic expansion months in 2015 and 2016.
Source: Florida Realtors
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