Buying a house is a big step, especially for first-time buyers. There is a lot to think about, especially if the economy is in a recession. There can be benefits to buying a home during a recession, but there are also risks to take into considerations. Here are some things you will need to think about if you decide to buy a house during a recession.
Advantages to buying a home during a recession
Perhaps the best reason to consider buying a house during a recession is the fact that interest rates are usually lower. The Federal Reserve typically cuts interest rates during an economic downturn, and that has a ripple effect on the economy. It becomes less beneficial to save and more beneficial to borrow money because it is less expensive to do so.
Another reason you might consider buying during a recession is that home prices may be cheaper. There will always be people who need to sell and move, and during a recession, they may be willing to accept less money than they would otherwise. Fewer people may be looking at their house, so it may be more difficult for them to sell. That could motivate them to accept less money, especially if they really need to move.
Since home prices tend to be lower during a recession, you could also get a bigger house than you would if you were buying while the economy is strong. You also might be able to afford a home in neighborhoods you otherwise wouldn’t be able to afford, simply because home prices are lower.
Drawbacks to buying during a recession
On the other hand, there are some disadvantages to buying a home during a recession. For one thing, you must take into consideration the stability of your job. During a time when people are getting laid off, you must make sure that you won’t lose your job after buying a house. If you have excellent job security and are sure that you won’t be losing your job anytime soon, it may be a good idea to buy during a recession.
One other thing to keep in mind is that many of the homes that are available during a recession are foreclosures or short sales. While it is possible to find a great deal in a foreclosure or short sale, most of the time, it is difficult to do so. Buying a foreclosure or short sale also comes with its own set of potential issues.
For example, foreclosures tend to be sold as-is, which means there may not be a home inspection. If there is a home inspection, the bank that’s selling the house won’t fix anything because it is a foreclosure. Additionally, foreclosures tend to sit empty for quite a while, and many homes develop serious problems when they sit empty for a significant length of time.
Short sales usually involve more than one lender, so it may take quite a long time to close on a short sale.
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now its editor-in-chief.