05/19/2022
Recessions are defined as significant declines in economic activity affecting the entire economy, as evidenced by production, employment, and other indicators. Economic recessions occur when the economy reaches its peak, and they end when the economy reaches its trough. A period of expansion occurs between the trough and peak.
You can use historical data to prove that home prices don't always fall during recessions. In the past four decades, there have been six recessions in this country. According to the graph below, looking at recessions dating all the way back to the 1980s, the average home price increased four times while depreciating only twice. The evidence shows that home values didn't depreciate or fall when the economy slows down in the past.
Home values depreciated for the first time in the early 1990s when prices fell by less than 2%. Again, home values dropped by almost 20% during the housing crisis of 2008. When people think about the housing crisis in 2008, they think that we would experience a similar situation if we went through another recession. However, this housing market is not about to burst. Fundamentals today are significantly different from 2008. It's probably not a good idea to assume we're going to the same direction.
As far as we know, we don't currently have a recession in this country, but if one comes, home values may not be affected. According to history, recessions don't equal a housing crisis.
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