I’m starting to hear so much more chatter about the “R” word, so let’s talk about it. What happens to the housing market during a recession? What happens to homes prices and jobs? I have some new visuals to help us talk through this. Also, let’s look at some spicy issues to keep an eye on.
NOTE: There are many places to rant about politics, but not here. I won’t approve comments that are only political and don’t add to the conversation.
UPCOMING SPEAKING GIGS:
3/6/25 Yolo Association YPN Event
3/12/25 Windemere Sierra Oaks
3/20/25 HomeSmart iCare Realty (private I think)
4/2/25 SAFE Credit Union (details TBA)
4/10/25 Yuba-Sutter Association (details TBA)
4/15/25 Culbertson and Gray (private I think)
4/24/25 KW EDH (private I think)
5/8/25 Private event (details TBA)
5/13/25 PCAR
6/5/25 Auburn Marketing Meeting
9/26/25 PCAR
11/4/25 SAR Main Meeting
DEEP THOUGHTS ABOUT THE “R” WORD:
Are you hearing more people talk about a potential recession? I’m seeing lots of chatter on social media, so let’s dig in. What happens to the housing market during and after a recession? Let’s have some conversation.
1) PRICES DON’T ALWAYS GO DOWN DURING A RECESSION
Lots of people say prices go down during a recession, but what do the stats show? Well, sometimes prices do drop or flatten. But other times they don’t. If the images below were all white in the background, and I asked you to guess where the recessions were, it would be really challenging to be right about all of them. Stats: Quarterly median sales price and Freddie Mac Price Index.
2) LOCAL MARKETS COULD BE DIFFERENT
National stats are cool, but let’s always try to digest local trends. So, here’s what Sacramento looks like. It’s hit and miss, right? Sometimes prices dip after a recession, but sometimes the market goes up. It’s not just one thing.
And in case you’re longing for an inflation-adjusted image…
3) UNEMPLOYMENT RISES DURING A RECESSION
Like clockwork, the unemployment rate shoots up during a recession (or it could start to increase before one happens). This is true in the United States and locally. If you want to see an image that really drives this point home, check out the United States from 1948 onward.
4) THE GREAT RECESSION ISN’T THE NEW TEMPLATE
What happened in 2008 isn’t the new template or formula for every future recession and housing market correction. I don’t say this to sugarcoat since there is nothing wrong with home prices going down. Let’s just recognize not every recession is the same in severity or length, so it makes sense to not impose what happened during the Great Recession onto every future market. All that said, there is no mistaking we’re seeing consumer debt and delinquencies growing. Real estate friends, check on your people.
Some closing hot issues:
5) POLITICS COLLIDING WITH REAL ESTATE:
Here are three quick topics I’m watching. This is NOT a partisan post, and this is not controversial, but sometimes housing and politics collide, so we need to digest this stuff together.
HIGHWAY TO THE TARIFF ZONE
We want to watch the economy closely as we’ve entered a tariff era under President Trump. Only time will tell how this affects prices for consumers, and so much of it depends on how long these tariffs last. In terms of real estate, there are definitely a few things we want to fixate on. Let’s look at consumer confidence, purchasing power, mortgage rates, and the price of new construction.
GAVIN NEWSOM CALLS STATE WORKERS BACK
This week Governor Newsom called state workers back to the office. This is going to be a massive lifestyle change for so many residents. In terms of the housing market, my inclination is to think this isn’t going to mean much for the residential market since many people will simply start commuting to work again without selling or buying a different home. There are some workers though who moved out of state or area, and now they have a decision to make about whether to come back or stay put. There could be others who use this as a catalyst to make a lifestyle change though – downsize, retire, move elsewhere, find a different job, etc…
ELON MUSK CUTTING FEDERAL JOBS
Let’s pay attention to federal jobs being cut across the country from Elon Musk’s DOGE (Department of Government Efficiency). This could matter for locals since we have over 14,000 federal jobs in Sacramento according to FRED data. It’s not clear yet how many jobs will be cut, but let’s keep this on the radar. On a personable note (and not a partisan statement), I want to encourage those speaking out in favor of the cuts to be aware there could be locals losing jobs who are reading your posts.
Thanks for being here.
LEAVING COMMENTS: There are many places to rant about politics, but not here. I won’t approve comments that are only political and don’t add to the conversation. The captcha is not working perfectly. If you open up a new browser, that should solve the issue. It’s been a problem for some when clicking over from my weekly email and trying to comment. My apologies. I hope to have this solved eventually.
Questions: What stands out to you the most above? Have you been having more “R” word conversations? Anything else you are watching in the market right now?
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I don’t see a prolonged recession coming. Sure, we could see a stock market drop of 15-20-25%, like 2022. But Wall Street now controls the FED, and in any economic downturn, the FED will be instructed to print more QE sugar. Within 6-9 months of the downturn, liquidity will be pumped back up and asset values (including homes) will return to an upward trend. That’s the new normal. I, for one, welcome our new oligarchy. Billionaires know better than us, obviously, because they’re rich. I trust oligarchs — not the constitution, not politicians, not the rule of law, not the courts. All that stuff is so archaic, and now just symbolic. I welcome the new age of accelerationism, of rule by corporate power, not by elected representatives. Already, you can see how Congress is unnecessary when you can simply hire a small private group to override Congressional budget allocation, cancel govt agencies, and fire 10’s of thousands of govt staff. It’s a glorious new day in America, private industry is taking over government, and recessions are a thing of the past. Thank you, super smart billionaires, for showing us the way forward!
Thanks Josh. Interesting take. We are living in very interesting times. I’m personally skeptical of billionaires. One thing we want to consider is they may be out of touch with the average person so to speak, and they might be tempted to put profit over everything. Jeff Bezos does know which movies I watch though, and Zuckerburg can see what I scroll on IG and Facebook. Do I want tech bros running the government though? That’s a NO from me.
Ryan, I hate to say, but you’ve been brainwashed. Rule by oligarchy is the -only- way forward. Old fashioned “representative democracy” has failed us. The constitution was an interesting experiment, but it’s time to move on. Congress is irrelevant and ineffectual, as we’ve seen recently. Power needs to be concentrated in to the hands of a few, and those few should be billionaires. Trump has it right — he has 14 billionaires in his cabinet. That’s a good start, but the ENTIRE cabinet should have been billionaires. He should remain in power for the rest of his life, so we can make sure the billionaires are given full and total power. They know best what you and I need, not Congress. Not old “made-up” laws. I mean, just look what a small private group of billionaire individuals is doing to our govt agencies! Wow!! Completely getting rid of many of them! This is the ONLY way forward. I, personally, will no longer follow the constitution or court orders. It is all entirely corrupt. Billionaires have OUR best interest at heart. THEY are the spirit of America, not democracy or representative government. Just as Putin and Orban have wisely aligned their governments with oligarchs, so should we. That is the way forward, and that is why we now vote in UN resolutions along with Russia, Hungary, Iran, China, and N. Korea. We used to call them the “axis of evil.” Now we know they actually had it right all along. A new day is dawning.
Josh, let’s not get too deep into politics here. I think we are looking at things very differently, and I’m okay with being labeled as more of a traditionalist.
Me thinks Josh is joshing you lol
Ha. I never know. People believe lots of different things.
While not part of the original design of balance of powers Big Business has been kept in check by Big Government (representing consumers/people). Now that Big Business is taking over Big Government – I am concerned who is the check on Big Business?
Thanks, Bob. Yeah, seems like an important thing to keep in check. Power sure can corrupt people, so it seems iffy to not have supervision. The truth is we all come to the table with our own ideas, biases, and even agendas, so when it comes to governing, we need to keep these things in check too.
Great post Ryan. There won’t be a housing-related recession because people have too much equity. Home prices have increased between 20-40% in most markets in the past few years (2018-now). Real estate is an efficient market. When a property goes on sale for 10-20% of its value, investors lap it up like a bloodhound from an old detective movie. People don’t sell their houses if they don’t have to, when rent is more than their mortgage for a smaller home, and when they can just cash in a bit of equity to get out of trouble.
Thank you, Kyle. I always appreciate your take. There are many articles starting to recognize the market has flattened or softened depending on the area, but it’s at tall order to get very quick affordability since we don’t have a wide disparity between sales and listings. The gap has definitely grown in recent years, but it’s not a 2007 gap. By the way, I wondered if you were maybe getting a little excited thinking I was going to talk about R today. Haha. I still haven’t learned that, but one of these days…
First glance at the title got me wondering if you were writing about code or statistics. I’d be happy to show my process or do a collab down the line for the real estate people. The options for tools are exploding these days. Exciting times.
Thanks, Kyle.
The Loan Delinquencies chart is interesting. People with mortgages/HELOCs have low delinquencies (and likely some equity and/or low interest rates, if purchased pre-2022). Delinquencies are increasing for credit cards and auto loans, but most of this (particularly auto) are subprime loans for people with bad credit (see Wolfstreet post of 2/18/25), who aren’t in the pool of likely homebuyers.
The more interesting group is the people with student loans. Over 10% were delinquent in 2019, and that dropped to nearly zero for reasons that are almost purely political. I don’t know how those 10% overlap with people who are also delinquent in their credit card and auto loans (not in home buyer pool), but I am curious:
– how many of these people bought houses in the past few years and will now have student loan repayments in addition to mortgage (and perhaps increased taxes/insurance/HOA)?
– how many of these people would have been looking to buy a home in 2025, but now won’t be able to, because student debt is a real thing again?
Thanks Maddie. Yeah, you’re right about mortgage delinquencies. Not a huge issue right now. A slight increase with loans (and a bit more with FHA and VA). Nothing major though. I do see the NY Fed has other graphs that show delinquency by age, and all ages have risen. Check out the link. But it’s certainly younger people coming in hot at the highest levels as we’d expect. https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2024Q4 (PDF)
Looks like the Wolfstreet post used some of the NY Fed data.
Solid question. Are people getting into trouble actual prospective buyers? What about sellers? I have to think we’re getting a mixture of everyone, but it’s hard to say with certainty. The one thing we know is the number of buyers is very low since affordability is tough right now. Let’s keep watching student loans. It seems like so many people are on hold. Lots of people hoped for forgiveness too, but that didn’t pan out en masse.
Great job bringing all that data together. I hope that a recession will trigger healthy increased activity in the real estate market through lower rates or something else.
Thanks Gary. Always appreciate your take.
Hmmmm, I am glad I avoid the social media chatter. Always wonder about the reliability of the crowd. As to the big R, wonder if it might be more specific to types of loans. I am reading (not in social media) that the FHA loans seem to be having some issues with pre-foreclosures. If that is true wondering if all the loan giveaways and changes that were done in the last few years to get everyone into a home is seeing a few cracks. Seems to me that the last few recessions 2008, 1991, 1981/ 1984 were due to some mickey mouse things being done by the GSE’s to sooth whomever the savage beast was that was screaming about getting people into home ownership. Those people that get sucked into these loans tend to be the first one to have a hiccup. My thought is watching FHA loans that might be the canary in the coal mine and it might give us some insight into the next leg up or down. Me personally I don’t wish anyone ill, but we need a RE correction to allow more into the housing market that have the ability and a job to qualify, right inventory forces strange things to happen. Really glad all is well at your end; we need to yak so I can catch you up on my world.
Hi Brad. Yeah, social media can be pretty chaotic at times. I will say recession conversations are happening in articles too. It’s even showing up on Google Trends over the past couple of months. I think some wonder right now if the Trump administration is trying to bring economic pain to get the Fed to lower rates. As far as FHA, there has been an increase in delinquencies, so those narratives are correct. It’s just important to realize FHA is a much smaller sliver of the entire market (and FHA always runs higher than conventional delinquencies too). Per HUD documentation, it looks like reduction of income, unemployment, and excessive obligations are the big categories right now for reasons for delinquency. Per this HUD document, those categories represent over half of the delinquencies. I can see in their numbers that there has been an obvious climb in each of these categories since mid-2022, so clearly Borrowers are feeling the sting of inflation and affordability. It looks like unemployment is only 12%, so maybe job loss isn’t the main factor. I wish we had access to data to know when these loans were originally made. https://www.hud.gov/sites/dfiles/Housing/documents/FHALPT_Nov2024.pdf (PDF)
Looking forward to catching up soon. Thanks as always, Brad.