How Recessions Impact Real Estate

[Dax Nollenberger]

In my latest Dax's Data, I dove into the impact that recessions have had on the national, regional, state (CA), and local (Santa Cruz) markets. 

There have been fifteen recessions in the last 100 years. The data I am going to present spans back to 1968. Eight recessions have occurred in that timeframe and, on average, last 10.6 months. The metric that I’ll be focusing on is Single-Family Median Home Price. While I realize that there are plenty of other metrics that help determine Real Estate market strength, prioritizing prices gets to the crux of the question, “will prices crash”?

Only in one of the last eight recessions did the median home price actually decrease.

1970 recession: Relatively mild overall and lasted 11 months from Dec 1969 to Nov 1970. We have the US and California yearly data. The US median home price in 1970 increased 5.5% from the year previous. This was a lower increase than 1968 to 1969 (8.5%) and 1970 to 1971 (7.8%). California experienced only a 1.7% median price increase over the previous year.

Conclusion: The recession had minimal impact on real estate as both the National and State Median home prices increased from the previous year.

Median Price change: Positive

Side note: the median home price in California in 1970 was $24,640… mind blown!

1973-1975 recession: The result of the 1973 oil crisis, this recession lasted 16 months from Nov 1973 to Mar 1975. We have the US and California yearly data. During the 16 months that spanned over three calendar years, the real estate market had explosive growth both nationally and at the state level in California. The 1973 US median home price was $28,900, up 8.2% from the year previous. It then grew another 10.7% in 1974 and 10.3% in 1975. California had similar Median price growth, gaining 9.2% from 1972 to 1973 and another 10% and 20.2% in subsequent years.

Conclusion: The recession had virtually no negative impact on real estate pricing nationally or in California. Some of the growth can be attributed to the high inflation rate of the 1970s.

Median Price change: Positive

1980 recession: The result of raised interest rates (as high as 20% in 1981) by Fed Chair, Paul Volcker, to fight the inflation of the 1970s. This recession lasted 6 months from Jan 1980 to Jul 1980. We have the US and California yearly data. The median home prices seem to be minimally affected by this brief recession. From 1979 to 1980, US Median home price rose 11.7% while California rose 20.2%.

Conclusion: Home prices jumped significantly in 1980, partly the result of inflation. California far outpaced inflation numbers (CA real estate is a great hedge against inflation, historically).

Median Price change: Positive

1981-1982 recession: Related to the 1980 recession, the recession of 1981-1982 was considered the main course after a 1980 appetizer. Caused by the 1979 energy crisis and a tightening of monetary policy, this recession lasted 16 months from Jul 1981 to Nov 1982. We have the US and California yearly data. While housing price growth certainly slowed, we still saw year-over-year growth in Median home price for both California and the USA from 1980 to 1981 (CA 8.2%, US 6.8%) and 1981 to 1982 (CA 3.8%, US 2.1%).

Conclusion: Home prices still grew during the 1981-1982 recession but inflation was historically high in ’79, ’80, and ’81. Home price growth could not keep up with the inflation rate.

Median Price change: Positive

Early 1990s recession: The result of the Fed’s rate hikes to combat inflation from 1986-1989. This recession lasted 8 months from Jul 1990 to Mar 1991. We have the US and California yearly data. US Median prices grew 2.9% from 1989 to 1990 and 5.5% from 1990 to 1991. California’s Median price decreased 1.2% from 1989 to 1990 and increased 3.6% from 1990 to 1991.

Conclusion: Small price growth for the national home prices and net-positive growth over two years for California.

Median Price change: Positive

Early 2000’s recession: The result of the Dot-com bubble (among other factors). This recession lasted 8 months from Mar 2001 to Nov 2001. We have US, regional, California, and local monthly and yearly data. Year-over-year, every area performed well in terms of median price growth. US median price grew 6.3%, California grew 8.7%, and Santa Cruz County grew 11%. Although looking at the monthly data, prices stayed relatively flat during the period from Mar to Nov 2001.

Conclusion: The year-over-year growth was really strong. When zooming in, the majority of the growth occurred just prior to and just after the defined recession period.

Median Price change: Positive Y-O-Y, Flat during recession months

Great Recession: Also known as the housing crash, this recession certainly did have an impact on pricing. First, though, let’s discuss briefly why the recession occurred. A lack of lending regulation and reckless lending practices led to MANY unqualified buyers getting qualified for way more than they could afford. When the market shifted, all those borrowers defaulted on their loans. This recession lasted 18 months from Dec 2007 to June 2009. We have US, regional, California, and local monthly and yearly data. Every region in the US had two consecutive years of declining median home price. The US was -9.8% from 2007 to 2008, and -12.5% from 2008 to 2009. California saw massive loss in median home price in both 2007 and 2008. California’s median home price dropped 37.8% from 2007 to 2008 and 21.1% from 2008 to 2009. Santa Cruz County was -23% from 2007 to 2008 and -15% from 2008 to 2009.

Conclusion: The real estate market isn’t recession-proof if it is the cause of the recession. Fortunately, proper legislation and regulation will ensure that a subprime mortgage recession won’t occur again as lending practices have been strengthened and buyers are highly qualified. Another important note is that this recession particularly affected the higher-price areas like California.

Median Price change: Negative

Covid-19 recession: This may be the nation’s quickest recession. Brought on by a global pandemic, the drop was sharp but the recovery was fierce. This recession lasted two months from Feb 2020 to April 2020. We have US, regional, California, and local monthly and yearly data. The worst month of this recession for real estate actually occurred in May of 2020 when the median price dropped over 10% locally. After that, when the interest rates plummeted, the market took off at a record pace.

Conclusion: Uncertainty creates fear which creates inaction. Once clarity was provided and quantitative easing improved loan affordability, demand soared. The lesson is action during inactive times is when you can get great deals.

Median Price change: Positive


Recessions do not mean that housing prices decrease. This isn’t to say that recessions don’t have some impact on housing but through eight analyzed recessions, only during one of them did prices actually drop. The more likely scenario is a brief slowing of growth or a temporary flattening of the trend. For those buyers willing to take the plunge, there are opportunities out there. For those waiting for the market plunge, the opportunity is going to pass you by.

Note from the author: Each area is different. My expertise is in the Santa Cruz County market. I highly advise you to find a local Realtor who has expertise/experience in their area and can properly predict how your hyper-localized market will react to a changing market. 

- DAX NOLLENBERGER