Economic Slowdown - What Does It Mean for the Housing Market?

According to a recent Federal Reserve survey, more and more Americans are becoming concerned about a possible recession. Those concerns were validated when the Federal Reserve met and confirmed they were strongly committed to bringing down inflation by using their tools and influence to slow the economy.

As expected, this has brought up many fears and questions as to how it might affect our lives, our jobs, and business overall. And one huge concern many Americans have is: how will this affect the housing market? We know how economic slowdowns have impacted home prices in the past, but the question still looms: how could this next slowdown affect real estate and the cost of financing a home?

According to Mortgage Specialists: 

“Throughout history, during a recessionary period, interest rates go up at the beginning of the recession. But in order to come out of a recession, interest rates are lowered to stimulate the economy moving forward.”

Here’s the data to back that up. If you look back at each recession going all the way to the early 1980s, here’s what happened to mortgage rates during those times (see chart below):

As the chart shows, historically, each time the economy slowed down, mortgage rates decreased. Fortune.com helps explain the trend like this:

“Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.”

And while history doesn’t always repeat itself, we can certainly learn from it. While an economic slowdown needs to happen to help taper inflation, it hasn’t always been a bad thing for the housing market. Typically, it has meant that the cost to finance a home has gone down, and that’s a good thing. 

Bottom Line

Historically, as the economy slowed, mortgage interest rates for those wanting to refinance or buy a home, did decline. However, no one knows what the future holds. As a trusted real estate advisor in Columbus and Central Ohio, let's connect and work together to determine the best steps for you to take, based upon the market and your particular goals.