Housing could be an unlikely place to hide out if a recession is coming

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Properties offered for sale in San Francisco, California

Some investors are fearing that the recent action in the stock and bond markets is signaling a recession may be nearing. If that’s the case, there could be an unlikely market to hide out in this time: housing.

It was the center of the last crisis, but before that, housing prices tended to hold up and even rise modestly during an economic downturn as mortgage rates fell in tandem with interest rates. If history is any guide, the housing market could be the unlikely safe haven in the next recession once again.

The U.S. housing market has weathered all the recessions since 1980, with the exception of the Great Recession of 2008, Jefferies pointed out in a recent note. The FHFA U.S. house price index rose by an average of 7.4 percent in the year prior to the recession and prices rose an average of 2.7 percent from the start of the recession to the end, the note stated.

“Other than during the GFC (Great Financial Crisis), home prices have kept rising even during recessions, probably because rates fall, the vast majority of people retained jobs and household formation continues,” said Thomas J. Thornton, Jefferies’ head of U.S. equity product management in the note to clients on Saturday.

“This could be a particularly big cycle for household formation owing to the millennials,” he added.

The subprime mortgage crisis brought about the last recession in 2008, but the housing market has since roared back with better lending standards. Lower long-term interest rates also boosted housing demand.