Friday, August 26, 2022 / by Jake Uriegas
Continued Assurance That A Recession Does Not Equal a Housing Crisis
Is the real estate market about to crash?
Let’s set the record straight.and cool your nerves down.
Does talk of an impending recession got you frazzled?
A RECESSION DOES NOT AUTOMATICALLY EQUAL A HOUSING CRISIS
While we are seeing a SHIFT pointing towards a more balanced market, the odds of the housing market taking a massive hit in the short term are pretty remote right now.
I realize that the economic crisis back in 2008 still causes some homeowners to break out in a sweat.
But the economy of 2008 is worlds apart from today's economy – there's simply no comparison.
Fifteen years ago, US home values plunged, TRIGGERING the crisis which led to a recession.
The unsecured lending for overvalued homes and soaring demand was the catalyst, NOT the result.
If you look at the last six recessions to hit the US since 1980, you'll see that home prices went up on 4 occasions, only dipping by less than 2% in 1990 and then bottoming out in 2008.
A recession represents a decline in economic activity throughout the economy across all sectors.
So, while it may be easy to associate falling economic activity with declining home values, this simply isn't the case.
Just look at what happened during the height of the COVID pandemic – no housing crisis.
Instead, homes appreciated by 6% in 2020 and continued to increase.
Home prices are determined primarily by supply and demand, followed by inflation and interest rates, among other things.
And demand for homes is still high in most areas– looming recession or not.
Of course, all housing markets are cyclical.
There are peaks, where prices are high, and valleys, where values trend downwards, but eventually, things inevitably even out before going through another cycle.
But the fact remains, Real Estate has always been and always will be one of your safest bets for protecting your money – just look at the historical track record – it always balances out.
Photo by MART PRODUCTION