If you’ve recently been thinking of purchasing a home, you’ve probably wondered how the upcoming recession will impact your ability to purchase a home. Regardless of your level of financial knowledge, this article will help you make sense of how a recession can impact the homebuying experience.
What is a recession?
There are many definitions of a recession, however, the most understandable definition comes from the National Bureau of Economic Research (NBER). Their perspective is that a recession is a significant decline in economic activity that is spread across the economy and that lasts more than a few months.
Although it’s true that economic activity has been slowing over the past couple of months, the national unemployment rate is still low, which indicates a relatively healthy economy. Compared to the recession of 2008, many experts feel that the housing market is healthier today because banks have since tightened their lending standards, and homeowners have significant amounts of equity in their homes, so they can sell their homes for a profit, rather than go into foreclosure.
Preparing your financials for a recession
One of the main steps you should take to prepare for a recession is updating your financial strategy to align with when you’ll need the money. For example, if you’re nearing retirement and have most of your retirement accounts invested in high-risk stocks, now is the time to explore lower-risk investments such as bonds.
You also should review your budget and ensure that you’re living within your means. Ensure that your housing, food, and fuel costs are all accounted for, and try exploring ways to save on discretionary costs such as by shopping for lower-cost goods, and dining out less.
The final major tip we’ll call out is the importance of paying down high-interest debt early, and increasing your emergency fund. You can do this by earning extra income such as through freelancing, asking for a raise, or taking on additional shifts at your job.
How a recession can impact your housing search
If you’re thinking of purchasing a home, now’s the best time you can make your purchase because quality inventory is on the market right now. Interest rates always fluctuate, and while rates may seem steep, you can always refinance to a lower rate down the road.
The great thing about the current housing market’s climate is that many buyers have left the market because they were burnt out from bidding wars and other stressors from the pent-up demand for homes. This means today’s homebuyers no longer need to waive contingencies to stand a chance at having their offer considered at closing.
The most effective way to simplify your search for your dream home is to work with a top real estate agent who can help you get the best deal on a home in a neighborhood that’s well suited for your needs. While it’s possible to DIY neighborhood and property research, realtors can identify intricacies that most buyers don’t notice, and they can also help negotiate a better closing price.
Also Read: 9 Feng Shui Home Tips for Positive Energy