Why a Coming Reccession Might Not Hit the Housing Market as Expected, According to a Top Realtor

The economic situation is quite unpredictable. Although inflation seems to be easing, rising tariffs , stock market dips and global uncertainty are keeping everyone on edge As mortgage rates fluctuate, homebuyers are querying whether housing will become more affordable during an economic downturn.

After more than 20 years in real estate I've experienced plenty of highs and lows, ranging from prosperous periods to severe downturns, such as the one in 2008. The reality is that there's always an opportunity For some homebuyers, particularly during an economic decline, the real estate market does not halt during a recession. Instead, it changes direction. If you are financially prepared, this change can work to your advantage. work in your favor .

Let's explore what a downturn truly signifies. mortgage rates , whether house prices might drop and when would be a good time to buy. buy a home .

Recession risks are real

There are numerous signs of an upcoming recession. warning signs Currently, layoffs are increasing, economic growth is decelerating, and consumer confidence is declining. People find their salaries insufficient for expenses, and their retirement savings are being impacted negatively.

Even though people have less spare cash and more constrained budgets indicating an overall economic downturn, we haven’t officially entered a recession just yet. A recession is typically defined by two successive quarters of declining gross domestic product. However, many individuals are already feeling the pinch. already feels like one .

Despite stable inflation rates, the prices of common goods and services remain elevated. budgets are getting hammered When people experience tightness whenever they use their card for groceries, it influences how they approach major buys such as homes.

Imminent interest rate reductions are not expected.

For the past few years, borrowing has been costly, causing both families and companies to be cautious when considering loans. It’s likely that the Federal Reserve will cut interest rates again Later this year, ultimately leading to more affordable financing.

However, these reductions probably won’t happen until the summertime. Currently, the Federal Reserve finds itself in a tricky situation. While the economy is slowing down and inflation is decreasing, it’s not happening quickly enough for them to act decisively. The central bank remains wary of changing its stance, particularly because new tariffs are causing prices to rise again.

Although lower interest rates may ultimately affect the housing sector, the Federal Reserve does not have direct control over mortgage rates. Mortgage rates adjust according to numerous elements, including the bond market and investor expectations. Despite the Fed beginning to reduce interest rates once more, anticipate that mortgage rates won’t necessarily follow suit immediately. drop like crazy Much of those anticipated reductions have already been factored into the market.

Mortgage rates aren't expected to decrease considerably.

Mortgage rates frequently decrease during an economic downturn, as evidenced in 2020 and previously in 2008. These lower rates assist in reviving the economy, which is something the Federal Reserve understands well.

However, this time things are more complicated. Volatility is prevalent across the board. Although interest rates have the potential to decrease, they could just as easily rise again at the first sign of positive economic data. Similar to numerous real estate professionals, I believe that the average rate will likely fluctuate significantly. interest rates for a 30-year fixed home loan is expected to fluctuate between 6.5% and 7.25% for most of 2025 , featuring weekly fluctuations within that range.

If you're waiting in hope 4% or 5% interest rates for mortgages , you might find yourself waiting longer than anticipated. Significant decreases in interest rates will require much more negative economic information to materialize.

It's equally important to highlight that Your individual financial state holds greater importance. Then consider your interest rate. If you have a reliable flow of income and a long-term strategy for managing a mortgage, waiting for an ideal rate may not be necessary.

It's unlikely that home prices will reach their lowest point soon.

Despite several years of consistent increase, home values might theoretically plummet should the bubble burst. However, in the current real estate landscape, property prices are not expected to decrease significantly.

Historically, home prices typically do not experience significant declines during economic downturns The housing market crash of 2008 stood out as an anomaly rather than being typical. We're more likely to experience modest growth rates or minor declines in particular regions, particularly those affected by higher insurance costs , such as natural calamities or tax changes (states like Florida, Texas, and Louisiana might be examples here). Increased inventory in certain regions across the nation could lead to a decline in property values.

But nationwide, we're still dealing with low inventory Until that shifts, it’s difficult to envision prices plummeting significantly. Moreover, with elevated expenses for both building materials and workforce, it’s evident that housing prices won’t be reaching their lowest point rapidly.

Waiting isn't necessarily always more cost-effective.

If you're financially stable, it could be cheaper to buy a home in a recession. You might find better deals, less competition and more negotiating power . But if lending tightens, getting a loan could get tougher. That's something we're already starting to see with condos and certain types of properties .

Additionally, there’s something called the “wealth effect.” People tend to become more inclined to make significant buys when they perceive themselves as wealthier—perhaps due to an increase in their stock portfolio or home valuation. However, should these figures begin declining, or if there’s a looming fear of losing one's job, individuals might retrench financially despite daily routines remaining unchanged. Significant economic fluctuations can greatly impact consumer behavior. For instance, someone who has recently seen a reduction of $20,000 in their retirement fund isn’t likely to be hurrying into major spending sprees. get a new mortgage .

The ideal moment to make a purchase never really exists.

The optimal moment to purchase a house it makes sense for you. If you have a consistent salary, strong credit , and you’re prepared to settle down, an economic slump in the real estate market might actually benefit you.

Simply don't hold off for an idealized perfect moment to secure a mortgage. Most individuals are anticipating the right signal to proceed. doesn't exist If you prepare, keep yourself updated, and collaborate with the appropriate team, you can make a wise decision regardless of economic conditions.