According to a recent survey from Wall Street Journalthe percentage of economists who believe we will see a recession in the next 12 months is growing. When I surveyed 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 about recession spreads, one concern many people have is: should i delay my plans to buy a house if there is a recession?
I think understanding a little bit about the dynamics of the housing market in past recessions will help us understand what might happen.
Below is historical data to show what happened in the real estate industry during previous recessions to help prove why you should not be afraid of what a recession would mean for the real estate market today.
A recession does not mean a drop in prices of the houses. To show that house prices do not fall every time there is a recessionit is useful to refer to historical data. As the chart 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 home values will fall.
Recession does not mean drop in real estate prices
Price variation in the last 6 American recessions
Most people remember the real estate crisis of 2008 (the larger of the two red bars in the above chart) 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 are following the same path.
A recession means falling mortgage rates. A search also helps paint the picture of how a recession can affect the cost of financing a home. As the chart below shows, historically, every time the economy has slowed, the mortgage rates have decreased.
Recession means drop in mortgage interest rates
Interest rate change from its highest point in the last 6 U.S. 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 the peak seen during the recession to the lowest point. And in many cases, they continued to fall after the fact, because it takes some time to change things, even when the recession is technically over."
And while history does not always repeat itself, we can learn and find comfort in historical data.
Are you in doubt?
Now that we have explained to you that all signs show that we are not in a real estate bubble, you can now consider investing in vacation homes in orlando. To take advantage of all the tips we have brought to you and go even deeper, you can talk directly to our relationship agents. They are always happy to talk to you with any questions you may have about investing in Florida.
In this text we approached the theme the behavior of the real estate market during recessions because it is interesting for those looking to invest in Florida. If you want to read more content like the one we brought in this article, just stay tuned here on our blog.
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