As talk of a possible recession starts rumoring around, the anxiety level may raise for many home owners and even home buyers. Fear of the market crash we saw in 2008 is still fairly fresh in our minds. Realtor.com last week released a survey of active buyers who planned to purchase in the next year or less, asking their opinions about an impending recession and its possible impact on the housing market. 59% believe the housing market would fare the same or worse than it did in 2008. In another four economic surveys, 70% of people believe that a recession will occur in 2019 or 2020 with an additional saying 2021.
So why should we not fear a housing crash?
The definition of a recession is “A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.” The already falling home prices in 2008 from other factors actually helped cause the severity of the recession, not the other way around. Let’s take a look at history. According to research done by CoreLogic, home values weren’t negatively impacted as they were in 2008 during the previous four recessions. See slide.
During the four recessions prior to 2008, home values depreciated only once (at a level that was less than 2%). The other three times home values appreciated, twice well above the historic norm of 3.6%.
Most experts agree with Ralph McLaughlin, CoreLogic’s Deputy Chief Economist, who recently stated, “We’re seeing a cooling of the housing market, but nothing that indicates a crash.”