The signs, according to a recent NBC report are pointing to a possible recession (consumer spending levels appear to have peaked several months ago, people have begun working fewer hours, and manufacturing activity has begun to pull back) - so how will this impact the housing market, you may wonder.
In general, buying a home during a recession will get you a better deal. The number of foreclosures or owners who have to sell to stay afloat increases, typically leading to more homes available on the market and lower home prices.
However, because this recession is unlike any other, every buyer will be in a unique position for a major financial situation. If you work in hospitality, for example, your current financial situation may be drastically different than someone who was able to shift into working from home seamlessly. Only you know whether buying a house during a recession is achievable for your family, but here are some factors to consider.
Pros of Buying a Home During a Recession
If you are looking at homes during a recession, there are some definite benefits you should consider.
Lower Prices
During a recession, there are usually less buyers, so houses stay on the market longer. This makes sellers more likely to lower their listing prices, so that their home is easier to sell. You might even get lucky with a home at an auction.
Lower Mortgage Rates
The Federal Reserve generally lowers the interest rate during a recession, to stimulate the economy. This results in banks lowering their rates, too, including the mortgage rate. With a lower mortgage rate, you will end up paying less for your home over the years. Depending on how low the rate goes, it could be a significant savings.
Seller Concessions
As their houses sit on the market longer, sellers start getting nervous. You can ask for concessions such as asking the seller to pay for closing costs.
Cons of Buying a House During a Recession
However, there are some things to consider before you decide to buy a home in the middle of a recession.
Job Uncertainty
This is the big one to keep in mind. With unemployment rates shooting up during a typical recession, many jobs are in danger of cutbacks or elimination. Even if you think your industry or position is secure, things can change quickly. And remember, a mortgage is just one of the costs of homeownership. You don’t want to find yourself in a foreclosure situation, so make sure you are secure in your job, first and foremost.
Banks Are Less Likely to Lend Money
Banks understand how the economic uncertainty can affect anyone’s job. So, they are less likely to approve mortgages, out of fear that they will have to foreclose on a home — a lengthy legal process.
Title Issues
If the current owners of the home you want to buy went deep into debt, or even into foreclosure, there may be title issues that affect your home purchase. Make sure your title company’s search is especially thorough.
Difficulty Selling Your Home
If you need to sell an existing home before you can buy a new one, this might be a problem during a recession. Depending on your local market, you might get less money than you would have expected, or your home might sit on the market for longer before selling.
Competition
Although there might not be as many home buyers during a recession, you might find yourself competing for a home with investment companies. These companies know that prices are lower during a recession, and they are there to make a profit.
You will have to take an honest look at your current financial situation and weigh the pros and cons carefully before buying a house during a recession. However, if you are certain about your finances and your financial future, you could end up getting your dream home at a more affordable price than you could have imagined!
Get The Best Deal When Buying a Home During a Recession
During a recession, working with a realtor who understands the local market is more important than ever. I can show you what is currently available and keep you informed of when new homes are about to come onto the market. I can also help with competitive pricing that will save you money and get you into your new home. Contact Me to get started - Tracy Curtis, Coldwell Banker Realty [email protected]
