Will a Recession Hurt Your Home Equity?
As talks of a potential recession in 2025 grow louder, many homeowners are asking a crucial question: What happens to my home equity value if the economy slows down?
Are We Headed for a Recession?
Economic indicators suggest that the risk of a recession is higher now than it was a year ago. With slightly negative GDP growth in Q1 2025, ongoing global tensions like a China trade war, tariffs, and rising interest rates, consumer confidence has declined. These trends are worth paying attention to, especially for homeowners.
Will Home equity Values Drop?
The good news: this isn’t 2008. Today’s homeowners are in a far stronger position. Most have fixed-rate mortgages and have built significant equity over the last several years. If a recession does occur, it’s more likely to result in slower home price growth or modest declines in specific markets—not a housing crash. A sharper correction would likely only happen if unemployment spikes dramatically
How to Protect Your Home Equity
Here are three practical steps to safeguard your equity:
Stay current on your mortgage payments.
Avoid over-leveraging with home equity loans or non-essential renovations.
Keep your home in good condition to retain market appeal.
Bottom line
Yes, a recession is possible—but it’s unlikely to erase your home equity in the short term. With proper planning and awareness, most homeowners will remain in a solid financial position. Real estate is a long-term investment, and staying informed and prepared is the best way to protect it.
