What happens in real estate during recession?

A recession can have significant impacts on the real estate market, which can in turn affect property values, home sales, and other aspects of the industry. Here are some of the ways that the real estate market may be impacted during a recession:

Decline in property values: During a recession, property values may decline as demand for homes and other properties decreases. This can lead to lower prices and reduced equity for homeowners, as well as an increased risk of foreclosure for those who are unable to keep up with mortgage payments.

Reduction in home sales: With fewer people looking to buy homes during a recession, home sales may also decline. This can lead to increased inventory and longer wait times for sellers, as well as reduced commissions for real estate agents.

Tightening of credit: During a recession, lenders may become more cautious about lending money for real estate purchases, which can make it harder for buyers to obtain financing. This can further reduce demand for homes and properties and contribute to declining property values.

Increase in foreclosures: As homeowners struggle to make mortgage payments during a recession, the number of foreclosures may increase. This can lead to an increase in distressed properties on the market, which can further contribute to declining property values.

Shift in demand: During a recession, there may be a shift in demand for certain types of properties or locations. For example, demand may increase for smaller, more affordable homes, while demand for luxury properties may decrease.

However this could mean an opportunity for purchasing large multifamily complexes since there is more need for more affordable housing, and there will be a need for rentals since there is a decrease in home acquisition. As always, you need to check the market conditions in your particular area of interest.