Steve Schappert, Recessions, and America’s Housing

Recessions and the housing market

Economic recessions — and the response to them by the Federal Reserve — can affect the housing market in a number of ways.

During a traditional recession, the Fed will usually lower interest rates. This creates an incentive for people to spend money and stimulate the economy. It also typically leads to more affordable mortgage rates, which leads to more opportunity for homebuyers.

But the current market is seeing interest rates rise instead of fall. Rising rates typically increase the cost of getting a mortgage to purchase a house. This, in turn, lowers the demand for homes in the market.

Indeed, as of early August 2022, the National Bureau of Economic Research had not declared a recession. However, sometimes data and sentiment don’t match, and while we may not be officially in one, there can still be a sense of economic slowdown that feels an awful lot like recession to many folks.