With growing concerns about a potential recession, many homeowners and buyers are questioning how the housing market will respond. A common fear is that a recession will automatically lead to a dramatic drop in home prices, similar to what happened in 2008. However, history tells a different story.

Let’s take a closer look at past recessions and what they reveal about home prices and mortgage rates during economic downturns.

A Recession Doesn’t Mean Home Prices Will Fall

A widespread misconception is that recessions always trigger a housing market crash. However, historical data paints a different picture. According to CoreLogic, in four of the last six recessions dating back to the 1980s, home prices actually increased.

The housing market collapse of 2008 was an anomaly, driven by risky lending practices and an oversupply of homes. Unlike that period, today’s housing market is built on much stronger fundamentals, including stricter lending standards and continued housing demand.

At the national level, home prices are currently experiencing steady growth. While the rate of appreciation has slowed compared to the peak of the pandemic boom, there’s no indication of an imminent crash. Instead, housing trends tend to follow their existing trajectory even during economic downturns.

For buyers and sellers, this means that waiting for home prices to plummet due to a recession might not be a strategy grounded in reality. If past patterns hold, prices are more likely to stabilize or continue gradual growth rather than experience a sharp decline.

Mortgage Rates Typically Decline During Recessions

One of the most consistent trends in past recessions is the decline in mortgage rates. Over the last six recessions, mortgage rates have dropped each time, often making homeownership more affordable despite economic uncertainty.

Why does this happen? During a recession, the Federal Reserve typically implements measures to stimulate economic growth, including lowering interest rates. As a result, mortgage rates tend to decrease, providing opportunities for buyers to secure lower monthly payments.

For potential homebuyers, this means that even if economic conditions become uncertain, there could be advantages in the form of lower borrowing costs. If you’re considering purchasing a home, a recession could actually work in your favor when it comes to securing a more favorable mortgage rate.

So, What Does This Mean for You?

A recession means mortgage rates could decline based on historical data. While that would help with affordability, don’t expect the return of the ultra-low 3% rates seen in recent years.

Bottom Line

The answer to whether a recession will happen is still unknown, but the odds have increased. That doesn’t mean you have to wonder about its impact on the housing market—history shows us what usually happens. Home prices tend to remain stable or rise, while mortgage rates often decline. Understanding these trends can help you make informed decisions whether you’re buying or selling in today’s market.