With all the talk of the Housing Bubble, Inflation, and Recession, these headlines are pretty scary. Should you Buy a House or Sell a House during a recession is a good idea in Metro Detroit? First, we need to find out how a Recession affects Real Estate.
A recession does not equal a housing crisis. That’s the one thing that every homeowner today needs to know. Everywhere you look, experts are warning we could be heading toward a recession, and if true, an economic slowdown doesn’t mean homes will lose value.
The National Bureau of Economic Research (NBER) defines a recession this way:
“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”
To help show that home prices don’t fall every time there’s a recession, take a look at the historical data. There have been six recessions in this country over the past four decades. As the graph below shows, looking at the recessions going all the way back to the 1980s, home prices appreciated four times and depreciated only two times. So, historically, there’s proof that when the economy slows down, it doesn’t mean home values will fall or depreciate.
The first occasion on the graph when home values depreciated was in the early 1990s when home prices dropped by less than 2%. It happened again during the housing crisis in 2008 when home values declined by almost 20%. Most people vividly remember the housing crisis in 2008 and think if we were to fall into a recession we’d repeat what happened then. First, let’s review if we are even in a Housing Bubble Ready to Burst. The fundamentals are very different today than they were in 2008. So, we shouldn’t assume we’re heading down the same path.
How Does the Increase in Mortgage Rates Affect Home Price and Home Sales
We will not know the true impact of the increase in mortgage rates for a few months. Right now with the Feds raising the interest rates, stock market corrections are causing the 10-year Treasury Yield to bounce around and mortgage rates to do the same. Remember, Mortgage Rates follow the 10-year Treasury Yield, not the Federal Reserve interest rates.
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Bottom Line: If the future holds a Recession Should You Buy a House?
For now, we’re not in a recession in this country, but it doesn’t mean homes will lose value if one is coming. History proves a recession doesn’t equal a housing crisis. If you’re worried about a repeat of “08”, then watch the video and graphs regarding “If We Are In A Housing Bubble Ready to Pop.
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As we move forward, it’s been challenging as we navigated through all the changes. Putting your dream of a new home on HOLD shouldn’t be one of them. Now more than ever, knowledge will be your power. Know the Market You’re In and your Negotiation Power. Check out Categories for additional updates regarding the Market | Buying | Selling
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