Housing prices dropped only three times since 1963 -- each instance was during a recession.
Recessions can effect the value of homes, which became clearly evident during the Great Recession of the late 2000s. The effect is negative. Home values nosedived the most during that time. While home values declined in past recessions, the market did end up bouncing back. Only three times since 1963 has the average price of a new home dropped, and all three instances were during a recession.
Recession of 1969-1970
This recession began in the fall of 1969 and carried through until September of the following year. In 1968, the average price of a new home sold for $26,600. In 1969, it moved up to $27,900 -- but the economy was not in a recession for the first 10 months or so of the year. In 1970, with the economy in a recessionary state for about three-quarters of the year, house prices dipped to $26,600, or by 5 percent.
Recession of 1990-1991
A jump in oil prices and a lack of consumer confidence pushed the U.S. into a recession from 1990 to 1991. The economy slowed down for a few years previously, but dipped over that specific period, and the value of new homes dropped. In 1990, the average price of a new home sold for $149,800. That number dropped by 1.8 percent in 1992 down to $147,200 and a further 2.2 percent in 1993 down to $144,100.
Great Recession
Signs of a recession popped up in 2007 and the American economy -- and the value of new homes -- suffered a deep setback over the next couple of years. The average price of a home reached an all-time high of $313,000 in 2007 and then fell to $292,000 in 2008. It plummeted further to $270,000, an overall drop of just under 16 percent over two years. Average house prices had not been this low since 2004.
Effect
The recessions of 1969-1970 and 1990-1991 were relatively mild compared to the one of the late 2000s, in which some people found themselves with an upside-down mortgage -- the value of the mortgage was worth more than the actual house because prices had fallen so dramatically. Many chose to simply walk away from their mortgage, leaving the house in possession of the mortgage lender.
