Rising Fears of a Recession and Stagflation: Should Homeowners Be Concerned?
Economic uncertainty is dominating the headlines, with fears of a recession and stagflation on the rise. After years of market highs and lows, 2025 was expected to bring stability to homebuyers and sellers. However, concerns over inflation, economic growth, and interest rates have many wondering: Should homeowners be worried?
The good news? Probably not. Here’s why.
Recession vs. Stagflation: What’s the Difference?
A recession is defined as two consecutive quarters of negative GDP growth, typically accompanied by rising unemployment and decreased consumer spending. It’s a normal economic cycle, though its impact on housing depends on broader market conditions.
Stagflation, on the other hand, is far more rare. It’s characterized by slow or no economic growth, high inflation, and high unemployment—a difficult combination that puts policymakers in a tough position. If they lower interest rates to stimulate hiring, inflation could skyrocket. If they raise rates to combat inflation, unemployment could worsen.
Currently, the U.S. economy is not in stagflation—employment remains strong, and inflation is easing. However, proposed tariffs, tax cuts, and global trade policies could introduce challenges that shift the economic outlook.
How Would a Recession Impact the Housing Market?
During a typical recession, buyer demand weakens as households delay major purchases, including homes. This can lead to an increase in housing supply and lower home prices. However, the effects vary depending on market conditions.
-
In 2020, the brief pandemic-induced recession sparked a housing boom due to record-low mortgage rates, increasing demand and sending home prices soaring.
-
In contrast, the 2008 housing crisis resulted in a dramatic downturn, as high unemployment and excessive foreclosures flooded the market with inventory.
If a recession occurs in 2025, it could reduce buyer activity while increasing inventory, potentially softening home prices. However, unless unemployment rises significantly, demand for housing is expected to remain stable.
How Would Stagflation Impact the Housing Market?
Looking back at the 1970s stagflation, home prices remained stable, but mortgage rates skyrocketed to nearly 19%. Given that over half of today’s homeowners hold mortgages below 4%, a similar spike would likely push many buyers out of the market.
While stagflation isn’t a current reality, shifts in economic policy, inflation trends, and global events could increase risks in the long run.
Should Homeowners Be Concerned?
For most homeowners, the biggest risk is job loss. If employment remains strong, homeowners who can afford their mortgages (or own their homes outright) are in a solid position to weather any economic downturns.
If the economy weakens significantly and layoffs rise, homeowners struggling with payments may be forced to sell, potentially at a lower price if the market softens. However, this is not the current outlook.
Thinking About Selling in 2025? Here’s What to Do
If you’re considering selling this year, timing is key. According to research from Realtor.com, April 13-19, 2025, is projected to be the best week to sell, with sellers likely to achieve higher sale prices and faster transactions.
With uncertainty in the economy, acting sooner rather than later may help homeowners take advantage of stable market conditions before any potential downturns.
Final Thoughts
While fears of a recession and stagflation are dominating financial conversations, homeowners shouldn’t panic. The housing market has remained resilient through past economic cycles, and as long as employment remains strong, homeowners will likely maintain stability.
If you’re thinking about selling, buying, or just want to discuss market conditions, let’s connect and strategize the best approach for your real estate goals!
š© Reach out today for expert guidance!
Follow me for more real estate insights and market updates!
About the Author
Nicole Strom
Nicole is a retired military spouse of over 25 years, as well as a full time Real Estate Professional serving her clients in and around Colorado Springs.Ā
You need a REALTORĀ® with vast experience and knowledge of our specific market. You need a REALTORĀ® that genuinely cares about you and puts your needs first. You need a REALTORĀ® you can trust. Nicole is that REALTORĀ®.Ā
