A recession does not equal a housing crisis. That's the one thing that every homeowner today needs to know home buyers as well, everywhere you look, experts are warning that we could be heading towards a recession sometime in the next 12 to 24 months. Even if that's true, an economic slowdown does not mean that homes will lose value.
A recession is defined as a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. Typically it's when you have two consecutive quarters of gross domestic product going negative, let's take a look at the chart. There have been six recessions in this country over the past four decades. As the graph shows, looking at the recessions going all the way back to the 1980s, home prices appreciated four times and depreciated only two times. One of those times was the recession caused by the mortgage and housing meltdown. And the other only saw a minor decrease in prices.
Most people vividly remember the housing crisis in 2008 and think that if we fall into a recession again that we would repeat what happened that time. The fundamentals of this market today are very different than they were in 2008. So we shouldn't assume that we're heading down the same path.
Bottom line, historically, there's a proof that when the economy slows down it doesn't mean that home values will fall. History proves a recession does not necessarily equal a housing crisis.Posted by Andy Mandel on
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