Math Through History: Recession = Lower Mortgage Rates = Home Appreciation

That cycle has put us in 25- to 30-year highs for mortgage rates. At the time of writing this article in late April, the proposed tariffs – rivaling those not seen in more than 100 years—are on a temporary pause, but we’ve not fully recovered from the market losses incurred in just days.

Finally, it’s also worth noting that real estate values are at an all-time record high. I empathize with all those who have been seriously impacted by these conditions. And, for all of us, it raises one big question: What is next?

What is Next?

I am in no way an economist or day trader but, as a mortgage loan originator and student of history, I believe it’s important to look at historic cycles and attempt to answer the question of
“what is next?” The value of this is not to make quick bets but to work to guide large financial decisions and specifically to discuss the risk and reward of buying a home in 2025.

Yes, the scary R-word of recession is begging to be thrown out there by the media and economists. Many reputable financial figures are even making personal statements, believing we are already in a recession. It may be helpful to remind the reader of the official definition of a recession, which is “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

A common indicator of this is two negative quarters of Gross Domestic Product, the measure of our country’s total economic activity. Many folks’ retirement accounts already have taken a big hit from tariff news and market trading, and a recession seems like it could be some type of inevitable financial cliff. 

However, economic slowing is exactly what the Federal Reserve has been working on in attempts to slow inflation. They did overdo it in the 1970s and 1990s and we did enter recession conditions at the end of both those cycles, so that, in and of itself, is not atypical. My purpose is not to then make a case that we are or are not heading toward a recession but to acknowledge that it is a potential outcome of the current condition.

A Recession Does Not Mean Falling Prices

Steadily slowing inflation and the “normalization” of economic conditions will likely bring lower mortgage rates, paced increase to demand and paced home appreciation. After all the whipsaws of real estate in the last five-ish years, “paced” and “normalization” would both be welcome words if the market could deliver on that. Many may associate stock market volatility and recession conditions with a falling housing market. History makes a different case.

Just like the simple title of this article, recessions usually lead to cheaper borrowing costs because of the Federal Reserve’s desire to stimulate a slowing economy. The lower cost of borrowing leads to more borrowing and the additional demand, coupled with the lower cost, leads to an average or slightly above average increase in home prices. The Great Recession brought on by the housing crisis is certainly an exception as is the minor, short-lived Gulf-War recession of 1991, in at least the most recent 44-year history.

When Others are Greedy Be Fearful, When Others are Fearful Be Greedy

It has been fascinating to have a front seat to the Flagstaff housing market the last three to six months. I don’t wish to make light of any individual’s concerns, whether political, financial or otherwise. Rather, I wish to make an objective commentary on the current state of market and human emotion in purchasing real estate here in Flagstaff.

I have seen more concern driving opportunity to buyers than driving deals away. Even just this last week, I saw two offers get accepted, with sellers commenting that they would have normally countered more aggressively but their concerns of market conditions drove them to accept the higher concessions or lower price and they just wanted to “get the deal done.”

In conclusion, it is the responsibility of every individual buyer and seller to assess their goals and their personal stability when making a decision to buy or sell. My encouragement with this information is to illustrate that a recession is not a “bad thing” for real estate. And, should history continue to repeat itself, this may also just be a moment in a bigger cycle. Long-term decisions, such as a home purchase, could have a great long-term upside, as history has shown. FBN

By Chris Hallows

For additional information or to schedule an appointment visit ChrisHallows.Benchmark.us or call 928-707-8572. The Flagstaff location is 824 W Route 66 Suite A-3.

Chris Hallows is the Branch Manager & Sr. Mortgage Advisor of Benchmark Mortgage Flagstaff.    NMLS 306345 Ark-La-Tex Financial Services, LLC NMLS 2143 |Equal Housing Lender