If you’ve been paying attention to the news lately, you’ve probably noticed a growing chorus of economic concerns. With chatter about a potential recession gaining steam, many homeowners and would-be buyers are asking the same question: What happens to the housing market during a downturn?
Let’s break down what history teaches us and what might happen next.
A Recession Doesn’t Automatically Mean Home Prices Will Drop
One of the most common fears during any economic dip is that home prices will tumble. Understandably, people often think back to 2008—the most painful housing crash in modern history. But here's the truth: that period was a rare exception, not the rule.
The housing crash in 2008 was triggered by a unique combination of risky lending, overbuilding, and a flood of foreclosures. Today’s market is fundamentally different, particularly because inventory remains tight. Even with more listings hitting the market this year in some areas, overall supply is nowhere near the levels that led to the last crash.
According to data from Cotality (formerly CoreLogic), in four of the last six U.S. recessions, home prices actually increased. The remaining two saw only modest declines.
Photo credits: Keeping Current Matters
What does this mean for today’s market? Generally, home prices tend to keep following their current trajectory—even during a slowdown. Right now, nationally, home values are still climbing—just at a more measured pace than we saw during the pandemic boom.
Mortgage Rates Often Dip in Economic Slowdowns
Here’s another trend worth noting: during recessions, mortgage rates have historically declined.
Looking back over the last six recessions, interest rates dropped each time. That’s because the Federal Reserve typically lowers borrowing costs to stimulate the economy—and that filters down to mortgage rates.
Photo credits: Keeping Current Matters
While we may not return to the ultra-low 3% mortgage rates of 2020 and 2021, a downturn could offer some relief for buyers hoping to lock in a better rate than what we’ve seen over the past year.
So, What’s the Takeaway?
Recession fears are real, and the economic outlook is uncertain. But when it comes to housing, the data tells a more reassuring story:
- Home prices typically hold steady or even increase during economic slowdowns
- Mortgage rates often dip, improving affordability for buyers
- Today’s tight inventory levels make a crash unlikely
In short, the housing market has proven to be more resilient than most people expect in a recessionary environment.
