Recession and the Housing Market: What History Tells Us

by Billee Silva, PA, ABR SRS

Recession talk is all over the news, and the odds of a downturn are rising this year. That naturally leaves people wondering what would happen to the housing market if we do go into a recession. Would home prices plummet? Would the market crash like it did in 2008?

Let’s take a look at historical data to see how the housing market has fared in past recessions, going all the way back to the 1980s.

A Recession Doesn’t Mean Home Prices Will Fall

A common misconception is that home prices must drop in a recession. Many people assume that if the economy slows, home values will follow suit. But the truth is, that’s not always the case.

In fact, looking at the last six recessions, home prices actually increased in four of them. According to data from CoreLogic, the only time we saw a significant and prolonged decline in home prices was during the 2008 financial crisis. That downturn was fueled by a housing market collapse due to subprime lending.

Housing Trends in Past Recessions

Let’s break it down further:

1980 Recession: Home prices increased by 6.1%.
1981 Recession: Home prices rose by 3.5%.
1991 Recession: Prices declined slightly by 1.9%.
2001 Recession: Prices increased by 6.6%.
2008 Recession: Prices fell by 19.7% due to the housing market crash.
2020 Recession: Prices increased by 6% as the pandemic spurred a real estate boom.

What This Means for Today’s Market

Unlike previous years, the current housing market here in Southwest Florida is seeing rising inventory, cooling demand, and a surge in new construction. Overbuilding in some areas could lead to price corrections, particularly if the economy weakens further and buyers become more cautious.

So, while a recession may bring some uncertainty, history suggests that home prices don’t always fall during economic downturns. However, given current market conditions, certain areas could see adjustments if supply continues to outpace demand.

If you have questions about how today’s economy could impact your real estate goals, let’s connect and discuss the best strategy for you.