Before the last downturn, Ben Carlson, writing for Fortune, detailed how mortgage rates normally decrease when the economy declines: “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 [it’s] technically over.”
Mortgage rates have risen as the economy has recovered from the pandemic; this is a good sign. Mortgage rates are still below the historical average.
But if the economy weakens again and causes rates to fall, this can provide an indirect benefit to homebuyers. Lower rates, as we saw during the pandemic, make it much more affordable to purchase a house. Homeowners who refinance may also get the chance to save.
It’s not guaranteed that history will repeat itself, but a rate drop does appear likely based on these figures. Should we enter a mild downturn, the Federal Reserve may also cut interest rates to help stimulate economic growth. Indirectly, Fed rate cuts can help to reduce mortgage rates.
In summary: While it’s understandable to have anxieties about “another 2008,” most downturns have not had such dire outcomes. You may not need to fear economic decline if you’re thinking about buying or selling a house. The evidence shows that home prices typically remain stable, and mortgage rates typically decrease.
Americans still value homeownership, even in uncertain times. After the homeownership boom in the pandemic, the U.S. homeownership rate of 66 percent has stayed relatively the same. More than half of the American population owns their home, for reasons like building long-term prosperity and hedging inflation. As the economy ebbs and flows, homeownership remains a safe bet for most people.