{"id":32648,"date":"2022-08-19T17:25:23","date_gmt":"2022-08-20T00:25:23","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=32648"},"modified":"2022-09-16T10:08:35","modified_gmt":"2022-09-16T17:08:35","slug":"how-long-do-recessions-last","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/how-long-do-recessions-last\/","title":{"rendered":"How Long Do Recessions Last? A Look at the Past for Clues"},"content":{"rendered":"

The U.S. housing market is undergoing a rebalancing. Visit\u00a0HomeLight’s 2022 Housing Trends Hub<\/a>\u00a0for information on how to navigate a shifting market \u2014 whether you’re a seller, buyer, or homeowner.<\/em><\/p>\n

After a global pandemic, soaring home prices and bidding wars, raging-high inflation and recent interest rate hikes, it seems we\u2019ve weathered enough economic drama for a lifetime.<\/p>\n

And yet, things are still getting funkier. Signs of recessions are mounting, sending consumer confidence plummeting to record lows<\/a>. More than 60% of CEOs<\/a> expect a recession in the next 12 to 18 months.<\/p>\n

For homeowners, just the word recession<\/i> gives off especially ominous vibes, as so much of your wealth may be tied up in just one asset \u2014 your home<\/a>.<\/p>\n

And for those who have been planning to sell a home<\/a>, or those trying to buy, recession adds a lot of doubt. Should you sit pretty and watch things play out? If you do, how long could you be waiting?<\/p>\n

To find out how long a recession may last, we dug into data from the complete history of economic recessions. Buckle up.<\/p>\n

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What is considered a recession?<\/h2>\n

First thing\u2019s first: What exactly is a recession?<\/p>\n

There isn\u2019t one official definition of recession. The National Bureau of Economic Research (NBER) is responsible for defining when recessions officially start and end. They use factors like increased unemployment and decreased manufacturing to determine when we\u2019ve hit a slump, and they use this general definition of recession to make their determination:<\/p>\n\n\n\n
Recession:<\/b> A significant decline in economic activity that is spread across the economy and that lasts more than a few months.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

However, there\u2019s a more technical definition that tends to be used most often in the media:<\/p>\n\n\n\n
Recession:<\/b> At least two consecutive quarters of negative growth in gross domestic product (GDP).<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

If you\u2019re a little foggy on GDP, don\u2019t sweat it. GDP is all the goods and services the economy produces in a given period. It\u2019s often measured in terms of economic quarters, which are periods of three months each. When GDP is negative, the country is experiencing a decline in economic activity.<\/p>\n

So, putting it all together in the technical definition above, a recession can be defined as a period of six months or more in which the economy isn\u2019t keeping pace with previous rates of growth.<\/p>\n

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What causes a recession?<\/h2>\n

All sorts of things can trigger a recession \u2014 a global pandemic, anti-inflationary interest hikes, energy crises, mass loan default, and explosive asset bubbles, brought on by investors who, in a state of exuberance, funnel hysterical amounts of cash into assets. Take, for example, the railroad bubble<\/a> post-Civil War. Or, the dot-com bubble<\/a> at the turn of the century.<\/p>\n

From a bird\u2019s eye view, recessions are just an apparently natural phase in an economy\u2019s business cycle \u2014 though, down on Earth, they\u2019re undoubtedly painful.<\/p>\n

But why do market downturns happen at all? To understand why, consider how the economy works during periods of economic growth.<\/p>\n

Life during expansion<\/h3>\n

During expansion, the sun\u2019s shining and the economy\u2019s output is growing, jobs are easy to come by, productivity is high and there\u2019s an optimistic feeling in the air.<\/p>\n

At a granular level, things are just as good:<\/p>\n