For many homeowners, the word Recession is practically synonymous with the 2008 mortgage meltdown. It brings to mind neighborhoods filled with For Sale signs and a massive foreclosure crisis. However, this is an artificial association based on recent history. If we take the long view of the economy, Recessions are generally no more likely to create significant housing downturns than any other movement in the economy.

What Is a Recession?

In general, an economic Recession is defined as a period of economic decline with a fall in the Gross Domestic Product (GDP) in two consecutive quarters. This is as contrasted with a Depression, which is a Recession that goes on for years and can involve an extreme, double-digit GDP decline.

Of course, our current economic downturn has been largely voluntary and is the result of the COVID-19 pandemic. This economic shutdown is unprecedented precisely because it is not primarily the result of market forces—and its resolution won’t be, either.

While economic activity is set to return to normal in some states with the relaxation of stay-at-home orders, a new round of COVID-19-related quarantines could come along again at any time. For many analysts, in fact, only an effective vaccine will put an end to the uncertainty presented by the pandemic.

Historical Trends: Recession vs. Housing Decline

Economic downturns can, of course, result in market factors that stress the housing market, from increased unemployment to decreased demand as families decide to stay put and ride out the financial decline. However, historically there is little positive correlation between Recessions and a decline in housing prices.

Looking back over the last forty years, there have been five separate recessions: 1980, 1981-82, 1990-91, 2001, and 2007-09. They have generally occurred at times of major political upheaval and at a fairly predictable pace.

Looking at housing prices during the same time periods, you see the following changes:

  • 1980: -2.6%
  • 1981-82: -5.8%
  • 1990-91: -6.7%
  • 2001: +4.4%
  • 2007-09: -16.7%

While small declines in housing prices generally occur during a Recession, with the exception of 2001, in most cases the declines are so small that they can be easily explained as part of the normal pattern of market fluctuations that are occurring all of the time.

Breaking these numbers down even further by month, the 1990-91 Recession, which includes the largest drop in home prices until 2007-09, occurred during a nine month period from July to March, traditionally the slowest time of year in most markets.

In contrast to the perceived association between Recession and home prices, the 2001 Recession saw home prices jump by 4.4% during the same period, even with the simultaneous upheaval experienced in the aftermath of the 9/11 terrorist attacks.

CHRISTY MURDOCK EDGAR,  “The Difference Between a Recession and a Housing Crash” American Lifestyle,