The Real Estate Edge

The Real Estate Edge

How Recession Affects Your Property’s Value

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Recession and housing crisis are not the same. The only thing every homeowner in today’s market must know is that. Experts sound recession affects everything facet of the economy, but it doesn’t always guarantee a fall in property value.

 

A recession is defined as: by the National Bureau of Economic Research (NBER): 

 

“A recession is an extended period of severe reduction in economic activity, often reflected in output, employment, and other indicators. When the economy hits its peak of action, a recession starts and ends when it reaches its low. The economy is expanding between its height and its low. 

 

Historically, property values don’t always decrease during recessions. Over the previous four decades, this nation has seen six recessions. Property prices increased four times and fell only twice throughout the recessions that date back to the 1980s. Therefore, historical evidence shows that property values don’t decline or drop as the economy slows down. 

 

The early 1990s was the first time property values fell, with a decrease of less than 2% in housing prices. It happened again in 2008 during the housing crisis when property values fell by about 20%. Most Americans believe that if we enter a recession, we will have a replay of the 2008 housing catastrophe. However, today’s market is not a bubble that will soon explode. Today’s housing terms are considerably different from those of 2008. Therefore, we shouldn’t assume we are going in the same direction. 

 

Although there isn’t one currently, if one does, it doesn’t always indicate that residences will decrease in value. History demonstrates that a recession is not the same as a housing crisis.

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