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The Impact of a Recession on the Housing Industry: A Mortgage Perspective

As the global economy experiences its ups and downs, the housing industry stands as a sensitive barometer, reflecting the impact of economic fluctuations. In times of recession, the housing market undergoes significant transformations, leaving many homeowners, prospective buyers, and mortgage borrowers anxious about their financial stability. In this blog post, we will explore how a recession affects the housing industry, with a particular focus on the mortgage perspective. By understanding these dynamics, homeowners and potential buyers can make informed decisions during uncertain economic times.

1. Home prices can actually go UP!

During a recession, one of the first visible impacts on the housing industry is a decline in demand. Uncertainty surrounding employment and financial stability often leads to potential buyers postponing their home purchase plans. The effect on pricing all depends upon how much supply there is.  As you can see, over the last 6 recession since 1979, there was only 1 recession in the Boise Metro area where home prices declined.  This was wholly due to over supply of homes that were on the market.  Currently in the Boise Metro market, we have a limited supply of homes.

2. Stricter Lending Standards

When a recession hits, lenders tend to become more cautious. Financial institutions become stricter in assessing mortgage applications, resulting in tighter lending standards. This means that borrowers will face more scrutiny regarding their credit scores, debt-to-income ratios, and overall financial health. While this may make it more difficult to obtain a mortgage, it also helps ensure that borrowers can comfortably afford their loan payments, minimizing the risk of defaults.

3. Potential for Lower Interest Rates

One potential silver lining in a recession is the possibility of lower interest rates. In an effort to stimulate economic activity, central banks may lower interest rates to encourage borrowing and spending. This reduction in interest rates can make homeownership more affordable, as mortgage rates typically follow suit. Homeowners may have an opportunity to refinance their mortgages at lower rates, reducing their monthly payments and potentially saving money in the long run.

4. Increased Risk of Foreclosures

A recession can significantly impact homeowners who experience job loss, reduced income, or financial hardship. In such cases, mortgage borrowers may struggle to meet their monthly payments, leading to an increased risk of foreclosures. High unemployment rates and economic uncertainty exacerbate this issue. It is crucial for borrowers to communicate with their lenders and explore options such as loan modifications, forbearance programs, or refinancing to mitigate the risk of foreclosure.

5. Government Intervention and Support

Governments often intervene during recessions to stabilize the housing market and mitigate the impact on homeowners and lenders. Various initiatives such as mortgage assistance programs, foreclosure prevention efforts, and stimulus packages can provide relief and support for struggling homeowners. Staying informed about available government programs and seeking professional advice can help borrowers navigate through challenging times.


A recession undoubtedly affects the housing industry, with the mortgage perspective playing a crucial role. Decreased demand, stricter lending standards, potential interest rate reductions, and increased foreclosure risks are all factors to consider. However, it's important to remember that every recession is unique, and its impact on the housing market can vary. By staying informed, talking to 1st Choice Mortgage, and making well-informed decisions, homeowners and potential buyers can navigate the housing industry during economic downturns and position themselves for long-term financial stability.

Remember, the housing market is resilient and has historically recovered from downturns. By weathering the storm and making informed choices, individuals can emerge stronger on the other side, ready to seize new opportunities in the housing market.

Posted by 375loan at 5/12/2023 11:19:00 PM


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