What is the impact of a recession on the real estate market?

During a recession, the overall economic activity slows down, which often leads to increased unemployment and a decrease in consumer spending. As people face financial uncertainty and tighter budgets, the demand for real estate typically diminishes. This reduced demand, coupled with an increase in the number of people needing to sell their homes due to financial constraints, can lead to an excess supply of properties on the market.

When properties are in greater supply than demand, sellers may have to reduce their asking prices to attract buyers. Therefore, it's common to observe a downward trend in both property values and sales volume during a recession. Buyers may be more cautious about making significant purchases such as homes, often resulting in fewer transactions taking place. This broader economic environment significantly affects the real estate market by putting downward pressure on both home prices and the number of sales.

In contrast, the other options suggest scenarios that either do not align with the typical outcomes during a recession or highlight unrealistic dynamics in a contracting market. For example, asserting that there are increases in property values during a recession overlooks the fundamental economic principles governing supply and demand. Similarly, suggesting that sales volume could increase without impacting property values does not reflect the cautious and financially strained behavior of buyers during economic downturns. Lastly, the idea