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Boston condos for sale: Are we in a Recession, yes. Boston real estate crash, no

Since the 2008 housing bubble burst, the word recession strikes a stronger emotional chord than it ever did before. And while there’s some debate around whether we’re officially in a recession right now, the good news is experts say a recession today would likely be mild and the economy would rebound quickly. As the 2022 CEO Outlook from KPMG says:

“Global CEOs see a ‘mild and short’ recession, yet optimistic about global economy over 3-year horizon . . .

 More than 8 out of 10 anticipate a recession over the next 12 months, with more than half expecting it to be mild and short.”

To add to that sentiment, housing is typically one of the first sectors to rebound during a slowdown. As Ali Wolf, Chief Economist at Zondaexplains:

“Housing is traditionally one of the first sectors to slow as the economy shifts but is also one of the first to rebound.”

Part of that rebound is tied to what has historically happened to mortgage rates during recessions. Here’s a look back at rates during previous economic slowdowns to help put your mind at ease.

Mortgage Rates Typically Fall During Recessions

Historical data helps paint the picture of how a recession could impact the cost of financing a home. Looking at recessions in this country going all the way back to 1980, the graph below shows each time the economy slowed down mortgage rates decreased.

What Happens to Housing when There’s a Recession? | Simplifying The Market
Boston condo mortgage rates

Fortune explains mortgage rates typically fall during an economic slowdown:

Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.”

While history doesn’t always repeat itself, we can learn from and find comfort in the trends of what’s happened in the past. If you’re thinking about buying or selling a home, you can make the best decision by working with a trusted real estate professional. That way you have expert advice on what a recession could mean for the housing market.

Boston condos for sale and the Bottom Line

History shows you don’t need to fear the word recession when it comes to the Boston condo for sale market. If you have questions about what’s happening today, let’s connect so you have expert advice and insights you can trust.

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Let’s start off with the bad news first. On Monday, the National Bureau of Economic Research (NBER) announced that the U.S. economy is officially in a recession. This did not come as a surprise to many, as the Bureau defines a recession this way:

“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.”

Everyone realizes that the pandemic shut down the country earlier this year, causing a “significant decline in economic activity.”

Though not surprising, headlines announcing the country is in a recession will cause consumers to remember the devastating impact the last recession had on the housing market just over a decade ago.

The Boston real estate market, however, is in a totally different position than it was then. As Mark Fleming, Chief Economist at First American explained:

“Many still bear scars from the Great Recession and may expect the housing market to follow a similar trajectory in response to the coronavirus outbreak. But, there are distinct differences that indicate the housing market may follow a much different path. While housing led the recession in 2008-2009, this time it may be poised to bring us out of it.”

Now for the good news, There are four major differences in today’s Boston real estate market which are:

  1. Families have large sums of equity in their homes
  2. We have a shortage of housing inventory, not an overabundance
  3. Irresponsible lending no longer exists
  4. Home price appreciation is not out of control

We must also realize that a recession does not mean a Boston condo crash will follow.  In three of the four previous recessions prior to 2008, Beacon Hill condo values increased. In the other one, home prices depreciated by only 1.9%.

Boston condos and the Bottom Line

Yes, we are now officially in a recession according to some experts. However, unlike 2008, this time the housing industry is in much better shape to weather the storm.

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