Is a Recession Here? Yes. Does that Mean a Housing Crash? No.

On Monday, the _National Bureau of Economic Research_ (NBER) [announced](https://www.nber.org/cycles/june2020.html) 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 real estate market, however, is in a totally different position than it was then. As Mark Fleming, _Chief Economist_ at _First American_, [explained](https://blog.firstam.com/economics/why-the-housing-market-may-weather-coronavirus-impact-better-than-the-great-recession): > _“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.”_ Four major differences in today’s real estate market are: 1. Families have [large sums of equity in their homes](https://www.simplifyingthemarket.com/2020/05/06/why-home-equity-is-a-bright-spark-in-the-housing-market/?a=550432-7d0dd2250a392515b4ab3273bfa644ce) 2. We have [a shortage of housing inventory](https://www.simplifyingthemarket.com/2020/06/02/home-prices-its-all-about-supply-and-demand/?a=550432-7d0dd2250a392515b4ab3273bfa644ce), not an overabundance 3. Irresponsible lending [no longer exists](https://www.simplifyingthemarket.com/2019/11/14/this-is-not-2008-all-over-again-the-mortgage-lending-factor/?a=550432-7d0dd2250a392515b4ab3273bfa644ce) 4. Home price appreciation is [not out of control](https://www.simplifyingthemarket.com/2020/03/04/real-estate-is-soaring-but-not-like-2008/?a=550432-7d0dd2250a392515b4ab3273bfa644ce) We must also realize that a recession does not mean a housing crash will follow.  In three of the four previous recessions prior to 2008, [home values increased](https://www.simplifyingthemarket.com/2020/03/20/a-recession-does-not-equal-a-housing-crisis/?a=550432-7d0dd2250a392515b4ab3273bfa644ce). In the other one, home prices depreciated by only 1.9%. ### **Bottom Line** Yes, we are now officially in a recession. However, unlike 2008, this time the housing industry is in much better shape to weather the storm.