Last week we chatted about the speculation of a recession occurring. There are a handful of reasons that people are coming up with this conclusion. We want to make it clear that we are not, in any way, predicting that this will happen. We have simply gathered information from others and put together the reasons why this is being said. This type of information includes the fact that both unemployment and inflation is high. This means less money is going into the economy. Also, the Federal Reserve policies are more strict than usual. Overall, there are less houses being built for a multitude of reasons. But when this occurs, the economy is typically impacted. With all of this being said, the conclusion for some is a possible recession.
If a recession happens, the housing market will be affected in a few different ways. To start, mortgage rates will likely decrease as inflation decreases. Typically these two rates tend to go in the same direction as one another.
However, when it comes to the price of homes, the price of homes will either stay the same or increase. In the last six recession that have happened, this is what happened. (Again, we do not have a crystal ball and are not saying that this is what is going to happen. We are only letting you know what has happened in the past.) 2022 is very different from previous recessions. To start, supply and demand is different. The demand for homes is high and the supply is low. Lenders are also more strict in 2022 as well. With this being said, what would happen to the housing market is not certain since things are different than in the past.
It is hard to tell what would happen to the prices of homes for sale. It is possible that the price would decrease as sellers would realize what is appropriate to sell the home. But again, that is not certain.
Something to keep in mind as it relates to the housing market and a recession is that it is important to realize that real estate investments need to always be looked at in the long term. So if you have that type of mindset, it is possible that a recession would not even have any effect over you as it relates to the housing market.