Would a recession put the brakes on the housing market?

In this Aug. 16, 2019, photo a for sale signs beckon buyers to homes along Park Avenue in Richmond, Va. (AP Photo/Steve Helber)

A recession would have devastating consequences for the U.S. economy, but the housing market, which has seen home values consistently rise since the end of the last recession, may not be affected significantly.

It was the housing market that triggered the last recession.

“The last financial crisis and recession, that was actually triggered by a crisis in the housing market,” Jeff Tucker, at real estate firm Zillow, told WTOP. “There was a wave of foreclosures and a ton of bad lending that helped bring down the entire financial system. Today we are looking at a recession not caused by the housing market. It is caused by a viral pandemic, so it is a very different story today,”

Banks are also much more capitalized than they were going into the last recession, largely because of new regulatory requirements put in place after 2008.

Tucker acknowledged he has no crystal ball, but he said during a recession he believes home prices would probably continue to rise.

“It is going to be very difficult to tell how much demand pulls back and how much supply pulls back. If they kind of both pull back, the net effect is kind of ambiguous,” he said. “When we’ve looked at previous epidemics, including the case of SARS in Hong Kong, it didn’t seem to have a huge impact on prices.”

In addition to limits on inventory for sale, home prices may continue to see upward pressure on prices because of historically low mortgage rates.

Zillow research shows that over the past 23 years, home values have tended to rise faster than inflation during a recession.

Jeff Clabaugh

Jeff Clabaugh has spent 20 years covering the Washington region's economy and financial markets for WTOP as part of a partnership with the Washington Business Journal, and officially joined the WTOP newsroom staff in January 2016.

Federal News Network Logo
Log in to your WTOP account for notifications and alerts customized for you.

Sign up