Truth About Mortgage Rates and Recessions

The media has been sounding the alarms on a potential recession this year, which has many questioning if it's a good time to purchase a home. When folks hear about recessions, most remember the sharp decline in home prices during the housing bubble in 2009 recession.

I know many have lost tens of thousands in equity when they sold their houses during that period. While it's understandable to believe that the recession caused the housing bubble, the truth was actually quite the opposite. The housing bubble actually led the U.S. into that recession.

Looking back at the other eight recessions, since 1960, home prices significantly increased or at least remain stable each time during and after the recession. One of the reasons this occurs is because interest rates significantly fall during recessionary periods, leading up to the housing bubble. Risky non-verified mortgages were commonplace. There was an excess of supply in the real estate market. Along with much lower buyer demand, builders were flooding the market with spec homes.

Today's housing market is much stronger. There are three million fewer homes for sale compared to the housing bubble and 14 million more households. Strong demand and tight supply should continue to be supportive of home prices. In other words, yes, it is still a great time to buy a home and start building equity for you and your family. If you have any questions about buying a home this spring, I would be honored to help you contact me or apply today through my website.

714-671-8151

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