When the subject of recession is mentioned, it’s hard not to think about the Great Recession of a decade ago and the devastation that it caused, not least in the housing market.
But typically, recessions have a limited impact on home values according to research by Zillow which looked at recessions over the last quarter century at both US-wide and state level.
There were two national recessions; the dot com crash in 2001 and the Great Recession from 2007-9; and 1,039 statewide recessions during a given month since 1997.
In 81% of those months, annual home value appreciation was positive; averaging 4.6% during economic growth and 4% during recessions.
The Great Recession was an outlier which saw the widespread collapse of home values that is so sharply remembered.
"The housing crash during the Great Recession left a lasting impression on our collective memory," said Zillow Economist Jeff Tucker. "But as we look ahead to the next recession, it's important to recognize how unusual the conditions were that caused the last one, and what's different about the housing market today.”
Tucker noted that rather than abundant homes, we have a shortage of new home supply and where the Great Recession had risky borrowers taking on adjustable-rate mortgages, we now have buyers with sterling credit scores taking out predictable 30-year fixed-rate mortgages.
“The housing market is simply much less risky than it was 15 years ago, and our experience in recent localized recessions shows how home prices can weather normal economic headwinds," he said.
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