House Hunters: Recession Edition
As the Coronavirus pandemic continues to take a toll on the American economy, many potential home buyers are stuck in a financial conundrum. The decision to buy now is a difficult one. On the one hand, most of us still remember the swift and drastic downturn of the real estate market in 2008. On the other hand, interest rates are low.
If you are one of the many people looking to make 2020 your year for home ownership, keep reading for advice on how to buy as the US undergoes another recession.
Understanding The Market
There is little doubt that real estate prices are going to take a downturn as unemployment rises and the stock market struggles to regain footing. However, many economists believe that the real estate market should remain stable and is more resilient than some may realize. MarketWatch explains that this recession is not like the one we experienced in 2008. This is primarily because our last major recession was caused by the housing market. Then, lenders were egregiously irresponsible, and housing prices shot up so fast it was inevitable that the proverbial bubble would burst. While caution is prudent, most buyers have no need to halt their plans because of fear.
Buying In A Recession
Just as in all markets, home prices fluctuate wildly during a recession. One of the most important things you can do is regularly monitor your target area. Prices will go up and down, and keeping tabs on what listing prices look like from week to week can help you make a more informed decision when it is time to house hunt (e.g., home sales in Las Vegas average $285,000). Once you’ve done your homework, you can move on to getting your financial ducks in a row.
Managing your finances during a recession starts with knowing your net worth. Calculate your assets, and come up with a reasonable number for how much money you can expect to put down on a home. Then, look at your income. You can find a mortgage calculator online to help you get a better idea of what you can reasonably afford.
When you do start browsing for houses, ask your realtor to help you identify homes that have been on the market for several months. This can indicate a motivated seller, particularly if more houses are coming available in the area. It’s tough to know how much leverage you actually have, but your realtor can compare prices to recent comparable sales, which will put you in a better position to make a fair offer for everyone.
If you do make an offer on a home, take the extra time to ensure the title is clear. Most lending institutions are going to require a title search anyway, but if they don’t, it is your responsibility to know that there isn’t a lien on the property you wish to buy.
Perhaps more important than doing your research is searching within yourself for the reasons that you are seeking homeownership now. If you are doing it simply because of low interest rates and the hope of a bargain, it may be time to put a pause on your purpose. While these are certainly benefits of buying, especially during a recession, make sure you truly want to own a home. And keep in mind, as Money Under 30 asserts, that low mortgage rates, other people’s insistence that homeownership is a good investment, and a recent promotion at work are not reasons to buy a house. This is still one of the biggest financial decisions you’ll make in your lifetime, and it should be done for the right reasons.
When your ultimate decision is to move forward with your home-buying goals, common sense is key. Do your research, know the market, and pay close attention to your personal finances. Homeownership is still the American dream, and it is always a good investment in your family’s current and future comfort.
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Article by: Suzie Wilson – http://happierhome.net