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  • Writer's pictureSang Han

Recession is different from housing market crash

There are people who say that a recession will come sooner or later and the real estate market will collapse, so they are postponing to sell or buy a house.

However, a recession does not necessarily accompany a housing market crash. Let's take a look:

Historically, of course, when a recession comes, interest rates go down. The Fed lowers the interest rate because it has to make money flow. Therefore, if a recession comes, the market situation may be favorable for buyers in terms of “mortgage interest rates”.

And there are many expectations that recession will come at the end of this year. However, it is said that a calm recession will come and it will be at a level where it can recover sufficiently in about 1 to 2 years. This is what the Federal Reserve explained at a meeting last March.

If you put together the opinions of those who say that a housing market crash occurs when a recession comes and the above (a recession will come), and when a recession comes, the interest rate goes down and the market collapses, it seems like a once-in-a-lifetime opportunity for buyers.

However, the reality is that a recession does not necessarily accompany a housing market crash. Looking at the 40-year recession since the 1980s, except for the recession in 2008 and the recession in 1991, which were accompanied by the subprime mortgage crisis, prices rose in all four recessions. And the drop in 1991 is less than 2%.

I recommend that you think carefully about it. As I have often said on YouTube and on blogs, the current market supply is far short of demand, and there is no way to drastically increase it in a short period of time. The current market is already in a situation where there is no way to increase supply, but demand is increasing. In this situation, if the recession and the interest rate fall, what will happen to the house price? From my point of view, the demand will increase even more. If so, the rate at which house prices rise is likely to increase even faster.

In other words, those who are hesitant about whether to enter the current market or not should quickly choose which of the falling interest rates and rising house prices is the gain and decide quickly. Waiting for a housing market crash that is not directly related to a recession is an issue that needs to be reconsidered.

If you have any questions about today's article, please feel free to contact me.

I'll see you next time with another good article.

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