Monday, May 5, 2025 / by Bob Cowan
Housing Market Outlook: What to Expect During an Economic Slowdown
Housing Market Outlook: What to Expect During an Economic Slowdown
With economic uncertainty making headlines and concerns about a potential recession on the rise, many homeowners and prospective buyers are asking the same question: How might this impact home values and purchasing power? To gain perspective, it’s helpful to look back at how the housing market has responded during past economic downturns—dating all the way back to the 1980s. The historical trends may not be what you’d expect, and they offer valuable insights for today’s market conditions.
Why a Recession Doesn’t Automatically Mean Falling Home Prices
It’s a common assumption that a recession will trigger a sharp decline in home prices—but historical data shows that isn’t typically the case. While the 2008 housing crisis did see a significant price drop, that event was driven by unique factors and remains an outlier rather than the norm.
One key difference today is the continued shortage of housing inventory. Even in areas where listings have increased slightly this year, overall supply remains well below the levels seen before the 2008 crash. This limited inventory continues to support home values, even amid broader economic concerns.
It’s important not to automatically link a potential recession with a sharp decline in home values. Historical trends don’t support that assumption. In most cases, home prices tend to continue along their existing path, regardless of economic shifts. Currently, on a national scale, prices are still climbing—though at a more balanced and sustainable rate compared to the rapid growth seen in recent years.
Although home prices generally maintain their existing trend during a recession, mortgage rates tend to move in the opposite direction. Historical data from the past six recessions shows a consistent pattern—each time, mortgage rates declined. This trend suggests that economic slowdowns often create opportunities for buyers to secure more favorable financing conditions.
Final Thoughts
While it’s still uncertain whether a recession will materialize, the chances have increased. Even so, that doesn’t necessarily spell trouble for the housing market or your home’s value. History offers reassuring insight: the housing market has shown resilience through past economic slowdowns.
