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What Does an Economic Slowdown Mean for the Housing Market?

By
Real Estate Agent with HomeSmart 0561240

What Does an Economic Slowdown Mean for the Housing Market?

According to a recent survey, more and more Americans are concerned about a possible recession. Those concerns were validated when the Federal Reserve met and confirmed they were strongly committed to bringing down inflation. And, in order to do so, they'd use their tools and influence to slow down the economy.

All of this brings up many fears and questions around how it might affect our lives, our jobs, and business overall. And one 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 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):

What

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 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

Concerns of a recession are rising. As the economy slows down, history tells us this would likely mean lower mortgage rates for those looking to refinance or buy a home. While no one knows exactly what the future holds, you can make the right decision for you by working with a trusted real estate professional to get expert advice on what's happening in the housing market and what that means for your homeownership goals.

 

 

 

 

 

Posted by

e signature for Shayne Stone

“YOUR Rock-Solid Choice Realtor for Making Home Sellers a Profit & Home Buyers Equity”

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Comments (6)

Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Shayne. When the market is strong, a smaller piece of the pie is OK. When the market is weak, a bigger piece of the pie is necessary. Whether the market is good or bad by someone else's standard, my standard is my business plan and my competition is me. Enjoy your day.

Jul 12, 2022 05:41 AM
Leanne Smith
Dirt Road Real Estate - Golden Valley, AZ
The Grit and Gratitude Agent

As a colleague said "you drive by more business than you will ever have." In times of uncertainty having a plan is essential and working that plan separates those who are more successful than those who are not as successful.

Jul 12, 2022 05:51 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Thank you for sharing the information. Wishing you continued success.  Have a wonderful day and sell a house.  bill

Jul 12, 2022 06:28 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Shayne and thank you for the information to share with us here in the Rain.  Make it a great day!

Jul 12, 2022 08:38 AM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Excellent post of sharing authentic information that consumers will appreciate, whether they are buying a home or not.  

Jul 13, 2022 11:08 AM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great information.   Thanks for sharing and enjoy your day!

Jul 14, 2022 06:38 AM