According to economic experts, home values will decline by 2-4%, which is the range by which property values often decline during recessions.
If demand drops because of job losses or a recession, the supply of homes suddenly increases, or there is a major economic downturn, that could indicate home values will decline.
Lower prices: With fewer buyers who can afford the purchase, home sellers will likely no longer see multiple offers or bidding wars for their properties. This can lead to lower home prices. Lower rates: During a recession, the Federal Reserve will often lower interest rates to stimulate the economy.
The definitive answer is that, on average, housing prices in the U.S. fell by about 15-20% in 2008, according to major indices like the S&P/Case-Shiller. However, this is just an average, and the true impact varied wildly depending on where you lived.
A recession is a significant, widespread, and extended decline in economic activity. Riskier assets like stocks and high-yield bonds tend to lose value in a recession, while gold and U.S. Treasuries appreciate.
“The demand for travel and hospitality services typically declines as consumers cut back on discretionary spending,” Sarib Rehman, CEO of Flipcost, said. “To attract customers, airlines, hotels and travel agencies often lower their prices and offer more promotions.”
Mortgage rates have tended to fall in response to recent recessions. Lowering borrowing rates is one of the tools used by the Fed to kickstart the economy. House prices are a little more mixed.
But recession did not ensue in 2024 either. In fact, for two years in a row, Wall Street economists were too pessimistic in their expectations for U.S. real GDP growth. This is shown below. We've added the consensus outlook for 2025 to the projections for 2023 and 2024.
Delving Into 2008's Recession
Home prices fully recovered by late 2012. If someone bought a house at the very peak of the recession in 2007 and held the property for 5 years, they made money in appreciation after 2012. It took 3.5 years for the recovery to begin after the recession began.
They typically last about a year and often result in a significant output cost. In particular, a recession is usually associated with a decline of 2 percent in GDP.
Although a recession isn't without risk to property owners, it does offer one key upside: Recessions typically hurt the housing market more than the rental market. Fewer people want to commit to the considerable expense of buying homes during a recession, so they opt to rent instead.
A housing market crash would make homes cheaper, but the reality for homebuyers isn't as simple as that. A market crash would likely cause economic distress in other sectors as well, making people less able to afford to buy a home. Experts don't expect the housing market to crash in 2025.
Real estate can provide passive income that carries you through the financial lows. Owning a physical property provides you with a tangible asset you can rent, sell or leverage—especially when housing inventory and vacancy levels are extremely low.
Some businesses and industries that tend to do well during a recession include: Healthcare: Healthcare is considered recession-proof because people get sick regardless of the economy. Consumer staples: Companies that sell food, beverages, and personal hygiene products are often profitable during recessions.
US housing affordability is at record lows, per Goldman Sachs. But the bank expects the cost of homeownership to return to "normal levels" by 2030. Slower growth in home prices, falling mortgage rates, and steady income growth could aid homebuyers.
According to economic experts, home values will decline by 2-4%, which is the range by which property values often decline during recessions.
As part of its latest outlook, Fannie Mae's economists shared five predictions for the housing market in 2025. They expect: Average mortgage rates will decline modestly but remain above 6 percent, with likely bouts of volatility. Existing homes sales will remain near 30-year lows, but location matters.
The 2007-09 economic crisis was deep and protracted enough to become known as "the Great Recession" and was followed by what was, by some measures, a long but unusually slow recovery.
For example, the New York Federal Reserve's predictive model gives a 30% chance of a recession by December 2025. That's largely due to historically elevated interest rates taking some time for their economic impact to be felt.
The Sahm rule is based on the historical pattern in which a rise in unemployment above a specific threshold tends to be followed by a further rise in unemployment, making the initial increase a reasonably accurate recession indicator.
Is the U.S. economy growing? The U.S. economy has shown steady growth since it dropped to unprecedented levels during the second quarter of 2020 due to the pandemic — and then rebounded almost as quickly. A year later, in the second quarter of 2021, the rate of annual growth hit a high not seen since the 1950s.
What Are the Biggest Risks to Avoid During a Recession? Many types of financial risks are heightened in a recession. This means that you're better off avoiding some risks that you might take in better economic times—such as co-signing a loan, taking out an adjustable-rate mortgage (ARM), or taking on new debt.
The short answer is: It's highly unlikely we'll see mortgage rates drop back to 3% anytime soon. However, recent inflation numbers point to cooling of the pace of inflation.
Key takeaways
If your credit score is strong, your employment is stable and you have enough savings to cover a down payment and closing costs, buying now can still be a smart move. But if your personal finances are not ideal at the moment, or if home values in your area are on the decline, it might be better to wait.