{"id":3378,"date":"2022-08-12T13:18:13","date_gmt":"2022-08-12T13:18:13","guid":{"rendered":"https:\/\/preprod.realtrends.com\/blog\/2022\/08\/12\/what-past-recessions-teach-us-about-todays-real-estate-market\/"},"modified":"2025-03-13T02:44:58","modified_gmt":"2025-03-13T02:44:58","slug":"what-past-recessions-teach-us-about-todays-real-estate-market","status":"publish","type":"post","link":"https:\/\/preprod.realtrends.com\/blog\/2022\/08\/12\/what-past-recessions-teach-us-about-todays-real-estate-market\/","title":{"rendered":"What past recessions teach us about today&#8217;s real estate market"},"content":{"rendered":"\n<p>Those working in real estate tend to experience ups and downs more than most other industries. I\u2019ve excelled in every market \u2014 boom times, slow times, and everything in between.&nbsp; It\u2019s the name of the game &#8211; real estate agents have to learn quickly to ride the wave and figure out the best way to stay successful as the market rises and falls.&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/preprod.housingwire.com\/articles\/housing-starts-data-raises-5th-recession-red-flag\/\">Some economists are predicting that we\u2019re heading for another recession<\/a> \u2014 and we\u2019re definitely in a shifting market \u2014&nbsp;so regardless of whether we actually enter a recession or not, one of the best ways real estate agents can prepare for any potential consequences is by examining the most recent economic downturns and their relationship with the real estate industry.<\/p>\n\n\n\n<p><strong>Real estate trends during the most recent recessions<\/strong><\/p>\n\n\n\n<p>There is no one-size-fits-all trend for the correlation between the U.S. recessions and their effects on the real estate industry because each was caused by different factors. For example, the 2008 recession was caused by the housing market crash, while the 1981 and 1982 crash was caused by Federal monetary policies intended to fight inflation.<\/p>\n\n\n\n<p>To understand our future, we must understand our past. Here&#8217;s a trip down memory lane and a prediction of what&#8217;s to come:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\" id=\"h-the-great-recession-december-2007-to-june-2009\">The Great Recession: December 2007 to June 2009<\/h4>\n\n\n\n<p>As the most recent recession, and thanks to its severity and length, the Great Recession is what many people remember when contemplating an impending recession. This particular recession saw the biggest drop in home prices compared to the four previous recessions, which is not surprising when considering that the crisis was fueled by the collapse of the housing market. Subprime mortgage practices caused the issuance of tons of high-risk loans, followed by record-breaking foreclosures.<\/p>\n\n\n\n<p>While these subprime mortgage practices were seen as early as 1999, housing prices continued to rise until the peak in 2007. However, the bubble finally burst in 2008, and prices plummeted. <\/p>\n\n\n\n<p>From the fourth quarter of 2007 to the same quarter in 2008, the <a href=\"https:\/\/money.cnn.com\/2009\/02\/12\/real_estate\/Latest_median_prices\/\">median home price fell from $205,700 to $180,100<\/a>. According to <a href=\"https:\/\/www.federalreservehistory.org\/essays\/great-recession-of-200709\">Federal Reserve History<\/a>, home prices fell around 30% during the entire recession. This, along with a 10% unemployment rate and 57% drop in the S&amp;P 500 index, contributed to this Great Recession as the worst economic downturn since the Great Depression.&nbsp;<\/p>\n\n\n\n<p>Despite all that economic turmoil, there were still more than 4 million homes sold in the peak years of the recession. That\u2019s means: A lot of people moved, and need to move, so there was  opportunity for business.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Early 2000s Recession: March 2001 to November 2001<\/h4>\n\n\n\n<p>The shorter economic downturn that occurred in 2001 was caused by a combination of the tech gold rush, the Y2K scare, and the September 11 terrorist attacks. <\/p>\n\n\n\n<p>Tech company values received immense investments and overinflated the stock market. Then, due to the fear that many computers would stop working as the year changed from 1999 to 2000, a short economic boom occurred as businesses and individuals bought Y2K compliant computers ahead of the new year. <\/p>\n\n\n\n<p>This caused a decline in sales and a stock market drop once January rolled around. When the attacks occurred later that year, the <strong>New York Stock Exchange<\/strong> was closed until September 17, resulting in a massive drop in the <strong>Dow Jones<\/strong> <strong>Industrial<\/strong> Average.<\/p>\n\n\n\n<p>As this recession was led by the stock market rather than the real estate industry, the effects were minimal to the real estate industry. In fact, according to <strong>ATTOM Data Solutions<\/strong>, <a href=\"https:\/\/www.movoto.com\/what-is-your-home-worth\/\">home prices<\/a> increased 4.8% during this period. <\/p>\n\n\n\n<p>Despite the stock market crash, conditions remained favorable for potential house buyers. They could be seen as safer investments than the stock market. In addition, the mortgage market was deregulated, and interest rates were low, so demand continued to rise, pushing prices with it.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Early 1990s recession: July 1990 to March 1991<\/h4>\n\n\n\n<p>Another short recession in the early 90s was caused by the Fed&#8217;s restrictive monetary policy intended to reduce inflation along with the oil price shock relating to the invasion of Kuwait. The economy slowed for a short nine months as oil prices soared.&nbsp;<\/p>\n\n\n\n<p>Despite having similar causes as the Great Recession, the effect on the housing market was completely different. While home prices went down during this period, the drop was less than 1%. This variance is relatively normal to the usual ebb and flow of the real estate market and, therefore, not unusual to see.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Early 1980s recessions: January 1980 to July 1980, July 1981 to November 1982<\/h4>\n\n\n\n<p>The recessions of the early 90s were very similar to the two that happened in the early 80s. All three were caused by a disruption in the global oil supply and Federal monetary policies in place to fight inflation. As a result, the United States experienced stagflation, a time when both high interest and unemployment rates plagued the country.<\/p>\n\n\n\n<p>Despite the insane interest rates that ranged from 12% to 18% during the two back-to-back economic downturns, home prices managed to increase. According to ATTOM Data Solutions, prices rose 4.5% in 1980 and 1.9% between 1981 and 1982.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">What will happen next?<\/h4>\n\n\n\n<p>When studying the most recent recessions, it&#8217;s clear idea about what will happen with the housing market during an economic downturn. <\/p>\n\n\n\n<p>Of course, the causes of the recession will have the most considerable effect on whether the housing market will tank with the economy. <\/p>\n\n\n\n<p>Still, the housing market can survive or even thrive as long as conditions stay favorable for buyers, and you can be successful no matter what market we\u2019re in, as long as you\u2019re willing to meet the moment and continue to <a href=\"https:\/\/preprod.realtrends.com\/blog\/articles\/21-underrated-real-estate-lead-generation-ideas\/\">prospect<\/a> for clients.&nbsp;&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>We may not enter a recession, but real estate agents can prepare for any potential consequences by examining recent economic downturns.<\/p>\n","protected":false},"author":39478,"featured_media":4822,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3255],"tags":[],"coauthors":[2643],"class_list":["post-3378","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-archive"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v25.4 (Yoast SEO v26.8) - 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