With inflation at its highest level in 40 years, rising interest rates and ongoing supply chain issues, the economy is struggling to gain resilience in a post-pandemic world. With all this pressure on the economy, fears of an impending recession are becoming the talk of economists, talking heads and around the water cooler.

Here, locally, it is almost impossible to separate the discussion of the recession from that of real estate. If a recession becomes a reality, what does history tell us about what to expect when it comes to home values?


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The good news is that not all recessions are the same, and the housing market does not always crash. Instead, an economic downturn can provide lucrative opportunities in real estate investments. Below, we’ll explore the causes of a recession, how it affects the housing market, and how you can invest in real estate in a way that’s right for you, regardless of general economic conditions.

What is a recession?

Let’s go with the classic definition of a recession, which is a significant decline in economic activity that lasts for months or years. Economic experts will declare a recession when the economy experiences negative gross domestic product (GDP), high unemployment, declining retail sales, and contracting measures of income and manufacturing for an extended period.

What factors lead to a recession?

There are many indicators that cause the economy to decline. With today’s events, Americans are facing record inflation as the prices of basic necessities such as groceries and gasoline soar. The federal government has raised interest rates to fight inflation, currently at 8.5% – the highest since the 1980s. Investors are watching a frenzied stock market closely and consumer confidence has fallen to its lowest level. lowest level in 11 years.

What happens to real estate in a recession?

Generally speaking, new home construction and home values ​​can decline during recessions, but this is also entirely dependent on other economic variables unique to that time period, combined with geo-targeted housing market trends.

The Great Recession (2007-2009) was the worst economic disaster in US history since the Great Depression (1920s-30s). Caused by the subprime mortgage crisis, three million Americans filed for foreclosure in 2008, or one in every 54 homes. The silver lining is that not all recessions are the same and economists don’t expect not that this one, if it happens, is so bad.

If history teaches us anything, it’s that investing in real estate is one of the best hedges against inflation and helps weather economic downturns like a recession. For example, to stimulate the economy, the federal government will ease its monetary policy, which will lead to lower mortgage rates, which will stimulate home sales. For example, in 2001, house prices during the Dot-com recession increased by 6.6%, and during the 1980 recession, prices increased by 6.1%.

With the exception of the Great Recession, home values ​​have weathered the storm, either holding steady or increasing in value, as seen in the chart below. If you click on the link below the chart, you can switch to the interactive chart to track home values ​​over the past eight recessions.

Shaded areas indicate US recessions. Source: US Census Bureau and US Department of Housing and Urban Development, median sale price of homes sold for the United States [MSPUS], taken from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MSPUS, May 26, 2022

As recessions deepen, one of the tools the Fed uses to stimulate the economy is to lower interest rates. One of the usual effects of lower interest rates on mortgages is that as mortgage rates fall, buyer activity increases, creating more demand in the market. Typical of more demand without an increase in supply is an upward push in prices. Therefore, history suggests that buying a home during a recession can allow you to take advantage of lower interest rates and the purchase price before the demand created by low interest rates hits. further drive up prices. investment that can help build lucrative capital. Look no further than Arizona.

Arizona housing market still strong

Trevor H. Halpern, JD is North&Co’s #1 Independent Agent, based in Phoenix. and the founder of the Halpern Residential real estate group.

Economic crisis or not, Arizona is still one of the fastest growing real estate markets in the country – and a strong real estate market can help lift the country out of the red.

Our friends at the Cromford Report, who have painstakingly forecast and analyzed the local market, note that the downward trend in supply has reversed, with property listings up more than 30% in the past six weeks – l one of the most dramatic changes they’ve seen. Cromford adds that supply is increasing in almost all areas of Maricopa County, but demand is down 6% since last month. That means now is an opportune time to profit as an investor and shop around in the income-producing real estate market.

Rental properties can help soften the blow of economic downturns because of the passive income they provide (especially when rents continue to rise) and because of long-term appreciation. Cromford notes that between April 2021 and 2022 there was an 8.5% increase in the number of investors buying properties to turn them into rentals. In fact, investor demand for rentals now accounts for over 20% of all local home sales. With more active listings in Maricopa County, there are more opportunities to make investment real estate a reality to build a secure nest egg no matter which direction the economy is heading. evolved.

Start your real estate investment journey with Halpern Residential

In past recessions, many real estate investors have built and grown their real estate portfolio even during the darkest phases of economic downturns. Many who invested wisely not only came out unscathed, but also saw themselves in a stronger financial position than ever before. If you’re not sure where to start, that’s where our knowledgeable team at Halpern Residential comes in.

We are immersed in one of the most watched real estate markets in the country. Take advantage of our actionable tips for navigating buying and selling in Phoenix and use them to your advantage. Find out how our strategy and knowledge can help you make money through all the ups and downs in the market. Recession coming or not, we’re just a phone call away when you need us.

Trevor H. Halpern, JD is North&Co’s #1 Independent Agent, based in Phoenix. and the CEO of property group Halpern Residential. As a native of Phoenix, Halpern’s in-depth knowledge of people and property has enabled him to create client success in all areas of the city. As a graduate of ASU’s College of Law, Halpern prides himself on delivering high-level strategy, effective negotiations, and precise tactical execution. Since 2011, Halpern has sold over $130 million in real estate and is in the top 1% of real estate agents in the Greater Phoenix area.