According to economic experts, home values will decline by 2-4%, which is the range by which property values often decline during recessions.
“The demand for travel and hospitality services typically declines as consumers cut back on discretionary spending,” Sarib Rehman, CEO of Flipcost, said. “To attract customers, airlines, hotels and travel agencies often lower their prices and offer more promotions.”
Southern California home prices close out 2008 down 35% - Los Angeles Times.
The experts agree that buying a house during a recession can result in scoring a great value on a home that may have been out of reach during better economic times. But if you want to buy during a recession, you need to have a stable employment and plenty of savings.
When purchasing a home, you have the choice of an adjustable-rate mortgage (ARM) or a fixed-rate mortgage. Interest rates usually fall early in a recession and then rise later as the economy recovers. This means that the adjustable rate for a loan taken out during a recession is likely to rise once the downturn ends.
Buying a home this year, particularly in early 2024, might mean you're able to beat the rush, as the market could get more crowded if or when rates drop further. Waiting, however, could give you more options to choose from as supply improves, along with the potential for increased mortgage affordability.
Delving Into 2008's Recession
Home prices fully recovered by late 2012. If someone bought a house at the very peak of the recession in 2007 and held the property for 5 years, they made money in appreciation after 2012. It took 3.5 years for the recovery to begin after the recession began.
The good news is that recessions generally haven't lasted very long. Our analysis of 11 cycles since 1950 shows that recessions have persisted between two and 18 months, with the average spanning about 10 months.
Typically, in recessions, the demand for houses declines and as a result house prices will fall. This was the case in the last recession back in 2008 when the housing bubble burst and the recession began.
Avoiding highly indebted companies, high-yield bonds and speculative investments will be important during a recession to ensure your portfolio is not exposed to unnecessary risk.
Stocks and bonds have relatively low transaction costs, allow you to diversify more easily and leave your cash more liquid than real estate (although the stock market is typically more volatile than the housing market). Meanwhile, real estate is a hedge against inflation and has tax advantages.
“Historically, when there is a recession, people start buying less — especially large purchases. So, this means that demand for cars would decrease pretty significantly,” said Ben Michael, director of auto, Michael & Associates. “And, when demand decreases, prices decrease as well.”
Some businesses and industries that tend to do well during a recession include: Healthcare: Healthcare is considered recession-proof because people get sick regardless of the economy. Consumer staples: Companies that sell food, beverages, and personal hygiene products are often profitable during recessions.
The answer really depends on your personal circumstances. “If you're concerned a recession is coming, it's generally better to sell now instead of waiting,” says Jade Lee-Duffy, a San Diego–based broker. However, “selling during a recession might be beneficial if you're looking to downsize or rent.
A sharp decline in home values is one of the most immediate consequences of a housing market crash. For homeowners, this means that the equity they've built up over time can quickly erode. This decline can leave homeowners in a precarious financial position, particularly those who bought at the peak of the market.
A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.” Consistent with this definition, the Committee focuses on a comprehensive set of measures—including not only GDP, but also employment, income, sales, and industrial production—to analyze the trends in economic ...
Experts are predicting a potential recession could begin globally in late 2024 – with a probability of around 35%, according to recent forecasts. This probability increases to 45% by the end of 2025. In India – while there are concerns about economic slowdowns – the IT sector and overall economy show resilience.
Lasting from December 2007 to June 2009, this economic downturn was the longest since World War II. The Great Recession began in December 2007 and ended in June 2009, which makes it the longest recession since World War II. Beyond its duration, the Great Recession was notably severe in several respects.
A recession is a significant decline in economic activity that can last months or even years. Most experts agree we aren't in a recession yet, but there's some risk that we could be headed for one in the next year. There are steps you can take to prepare emotionally and financially for a recession.
Experts overwhelmingly say that the housing market isn't going to crash anytime soon. The last housing crash helped cause today's lack of supply, which is what's keeping prices from falling. Mortgage rates, however, are expected to ease in 2025. This will help make homeownership more affordable.
The Great Depression of 1929–39
This was the worst financial and economic disaster of the 20th century. Many believe that the Great Depression was triggered by the Wall Street crash of 1929 and later exacerbated by the poor policy decisions of the U.S. government.
If possible, it's good to buy a house at the time of year when prices are lowest and inventory is highest. Traditionally, that's August or September. Prices usually go down in late summer and early fall, since fewer buyers are looking at homes and inventory is still pretty high after the busy spring selling season.
You might benefit from waiting a few months, says Brian Rudderow, a real estate investor at HBR Colorado. "I'm personally holding off buying until later in the year, specifically fall of 2025, because mortgage rates are expected to drop again along with home prices.
Mortgage rates have backed off from the highs hit in late 2023, but they're still elevated. And home prices are sky-high, with NAR's November data reflecting 17 consecutive months of year-over-year increases. Together, these factors might dissuade you from buying right now, and that's understandable.