Housing: The new recession-proof investment?

While the housing market was a centerpiece of the 2008 financial crisis, its stagnant recovery could actually save it from a downturn in another potential recession.

“Because of the fact that it has been underperforming during the economic recovery, there is less room to go down,” Lawrence Yun, chief economist at the National Association of Realtors, told FOX Business. “I think the housing market would not see any big negative hit if there was an economic recession.”

Yun said in the event of a recession, interest rates are likely to decline, while the Federal Reserve could halt rate increases and even cut some short-term interest rates – making borrowing easier for investors.

While the U.S. economy has undergone a healthy recovery – with the unemployment rate currently sitting at 3.7 percent with GDP rising 3.5 percent in the third quarter – the housing market recovery has remained much more muted.

Home sales have remained stagnant as supply restrains first-time buyers and prevents current homeowners from looking for new properties. In October, pending home sales fell 2.6 percent – the tenth consecutive month of annual declines.

The inventory crunch has also pushed home prices, and values, higher.

Investors have become increasingly concerned about the prospects of another recession, as stocks enter correction territory and the yield curve flattens – traditionally considered a sign of economic weakness. The spread between the 3- and 5-year notes actually inverted – often thought of as a sign of pending recession – though it is not the most closely watched gap.

But, even though the Fed has been steadily increasing the federal funds rate, interest rates remain relatively low. Market volatility has led to bond yields falling, which pushed mortgage loan application volume higher this week as Americans rush to refinance. The 30-year mortgage rate saw its largest single weekly drop since 2017.