As recession fears grow, many wonder how the housing market will react. While economic downturns bring uncertainty, history shows that the housing market can be robust.
A new analysis from First American reveals that past recessions don’t always spell doom for real estate. For instance, during the pandemic in 2020, home sales initially dropped due to the economic shutdown but quickly recovered due to record-low mortgage and strong demand.
The housing market’s performance depends on the causes of the recession and the Federal Reserve’s actions. The Fed typically lowers interest rates to stimulate growth, resulting in mortgage rates often declining, boosting house-buying power.
This week, the Fed held interest rates steady and maintained its stance on two rate cuts later this year. Mortgage rates have drifted lower from their higher of 7% but stagnated around 6.6%. This is partly due to the growing uncertainty over the potential impact of President Trump’s tariff policies.
“While recession fears loom, housing has proven resilient in past downturns. Rather than assuming a market crash, history suggests that lower mortgage rates could help support the housing market, just as they have in previous recessions,” First American economist Odeta Kushi wrote in a note to clients.