Is the current economy making it hard for you to buy a house? Have no fear, there are still many on-ramps available to buy a house for the price of a car. It may seem concerning and even downright frightening during these tough times, but remember, there’s always an opportunity, even in the most challenging of seasons. The difference-maker is doing your research and working with a capable guide before taking the leap.
Through MY SMART COUSIN, we empower you with the knowledge and skills necessary for financial security. We want to help Black and Brown folks and women, in particular, captain their finances so that buying a house for the price of a car goes from ‘to-do’ to ‘to-done’! As Real Estate Investment Coaches, we guide clients through the various acquisition stages and industry opportunities to build a buy-and-flip or buy-and-hold real estate investment portfolio.
Do you want to own a house but don’t think you can afford it? You’re not alone. According to data from the Real Estate Monthly Listing Housing Report, the average listing price for a house in June 2022 was a staggering $450,000, up more than $100,000 over the price in June 2020. But instead of simply shaking your head in dismay, what if I told you that the economy was on your side to buy a house for far less than that? Recession-era real estate bargains are out there if you know where to look. In this blog post, we’ll show you how to buy a house during a recession. So whether you’re looking for your first home or simply trying to invest in real estate, keep reading for tips.
IS IT A GOOD TIME TO BUY A HOUSE DURING A RECESSION?
A recession is typically defined as two consecutive quarters of negative economic growth. During a recession, many people see the impact of a sluggish economy in the form of reduced job hours, job losses, and lower profits for the self-employed. As a result, consumer confidence drops, and the stock market often experiences declines. However, a recession can also be a good time to buy a house.
Because fewer people have the means to buy a home during a recession, demand cools off causing housing prices to fall. Since inflation is part of the mix with this recession, the Federal Reserve is hiking interest rates, leading to higher mortgage rates, which further tamps down housing demand. As a result, buying a house during a recession can turn what was once a seller’s market into a buyer’s market and provide an opportunity to get a great deal on a property. Of course, it’s important to carefully consider your finances before making any major purchase during an economic downturn. But for those who are in a strong financial position, a recession can be a great time to buy a home.
THE EFFECT OF A RECESSION ON THE HOUSING MARKET
The housing market is primarily driven by supply and demand. When there is high demand for houses, prices go up. The opposite is also true – when there are more houses on the market than there are buyers, prices go down. The Great Recession of 2007-2009 had a profound effect on the housing market, both in terms of demand and supply and on the economy more generally. Many people lost a significant portion of their wealth and were no longer able to afford to buy a home. In addition, mortgage rates rose, making it even more difficult for potential buyers to obtain financing. As a result of the decrease in demand, prices of both new and existing homes fell sharply.
In terms of supply, the recession led to a decrease in the number of new homes being built. This was due to both a decrease in funding for new construction projects as well as a decrease in the number of people who were interested in buying a home. In addition, many people who already owned homes found themselves unable to sell, further decreasing demand for the new homes that they might move into.
THE BENEFITS OF BUYING A HOUSE DURING A RECESSION
Although the economic recession has been difficult for many people, it has also created some unique opportunities for those looking to buy.
· One of the biggest benefits of buying during a recession is that prices are typically lower than they would be during more prosperous times.
· Additionally, demand usually cools off, making it easier to take your time considering a purchase rather than being forced to sign on the dotted line then and there.
· A third benefit is that with less demand, sellers are often more willing to make concessions, such as paying for closing costs or including appliances in the sale.
Buyers who are willing to take advantage of these market conditions can find themselves in a very favorable position when purchasing a new home.
THE DISADVANTAGES OF BUYING A HOUSE DURING A RECESSION
· FORECLOSURE RISK
One of the biggest disadvantages of buying a house during the recession is the increased risk of foreclosure, should you find yourself unable to afford the home long term. As the economy falters, more and more homeowners tend to fall behind on their mortgage payments. The rising tide of late payments means that banks might, in turn, be more likely to foreclose on properties and sell them at short sale prices. Late payment fees and additional interest can leave owners with very little equity in their home and even result in the home being sold for less than the outstanding mortgage balance.
· FEWER FINANCING OPTIONS
Another disadvantage of buying a house during a recession is that it can be harder to secure financing. With the one-two punch of lenders tightening credit requirements and consumers feeling the pinch of the economy on their pocketbooks, it can be difficult for buyers to qualify for a loan. And even if buyers are able to secure financing, they may have to pay a higher interest rate due to rate hikes by the Federal Reserve and the increased risk associated with lending money during an economic downturn.
· COMPETITION AMONG THE INVESTORS
Finally, competition from investors can make it difficult for buyers to find affordable homes during the recession. While there are fewer buyers overall, the ones remaining are often cash buyers who are willing to pay top dollar for properties. This can whittle down inventory, drive up prices and make it difficult for buyers who are trying to purchase a home within their budget.
WHAT TO DO IF YOU DO NOT HAVE ENOUGH MONEY TO BUY A HOUSE DURING THE RECESSION?
The recession has also caused many would-be homebuyers to put their plans on hold. After all, buying a house is a major financial commitment, and it’s natural to be cautious when the future is uncertain.
However, there are some reasons to believe that now may actually be a good time to buy a house. Do not be afraid of the bear market- be smart and be aware of the programs the government has in place to help out with mortgages. There are plenty of ways to work around the current state of the economy, so if you’re thinking of buying a house, don’t let the recession deter you. Talk to a financial advisor and explore all your options- you might be surprised at what you can accomplish.
SUMMARY
So, is it a good time to buy a house during the recession? The answer to this question largely depends on your personal circumstances and where you live. However, there are several compelling reasons why buying a house during a recession, particularly if you’re buying one for the price of a car, might be a smart move right now. There are also some potential disadvantages to consider before making such a big purchase decision in today’s economy. Have you decided to buy a house during the looming recession? We’d love to hear how it goes!
YOU CAN ALSO READ: A BEGINNERS’ GUIDE TO BUY AND HOLD REAL ESTATE
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