Josh
The number of homebuyers who expect a recession in the U.S. to begin in the near future has been increasing, with over 36 percent of active buyers expecting it to begin in 2020, according to a recent survey by Toluna Research.
The question is, is it a bad idea to buy during a housing recession, or when there is talk of a recession looming? Recessions usually last two years or less – they all have since the Great Depression of 1929. In retrospect, those were all good periods to purchase real estate. But you’ll want to think about the pros and cons before moving forward.
How Much House Can You Afford?
When the recession hits and home prices drop, it can be a great time to get a good deal on a home, but it’s also important to take an honest look at your financial situation. Your first step should be to use a mortgage estimator so that you know how much home you can afford before prices start to inch back up. Remember that recessions can affect everyone. You’ll want to be reasonably sure that you’ll be able to keep your job or that your business will continue to thrive. You wouldn’t want to borrow a huge sum of money only to find that you can’t pay that mortgage loan six or 12 months down the road from now.
You May Get a Better Deal on a Home That’s Been on the Market For Awhile
In a recession, or when one seems to be looming, you will have a better chance of getting a sweet deal, especially on homes that have been languishing on the market for several months or more. It’s possible that the seller will agree to lower the price, cover some or all of the closing costs and/or throw in extras like fixtures, furniture, or a lawnmower.
Be Sure the Title is Clear
During a trying time, a seller might want to sell their home because they’re in over their head – the property could be encumbered by a lien from a bank or other lending institution, service provider or contractor. That’s why it’s a must to use a title insurance company and have an attorney do a title search to ensure the property can be transferred without risk. Otherwise, you could end up having to absorb those liabilities. While lenders usually require this if you plan on taking out a mortgage, if you’re paying cash, it’s important that you utilize these services as well.
Know What You’re Getting Into
No matter what the economy is like, not every home is going to be a good deal. Some may be poorly located, for example, a high-traffic area with lots of noise and/or eyesores, and some are likely to require extensive repairs. While having to make some small cosmetic fixes can get you a bargain, undergoing a major rehab usually isn’t the best idea. If you aren’t sure what you’re in for, hire an appraiser.