The word recession is enough to send chills down anyone’s spine, especially homeowners and
homebuyers.
What will happen to the housing market? Will we see another housing crisis like 2007?
Fortunately, the answer is ‘no, we will not see another housing crisis.’ Here’s why.
Home Prices remain High
If you’ve monitored the housing industry over the last couple of years, you know home prices
are wildly inflated. That was due to the crazy high demand and much lower supply. It was a
natural turn of events.
Buyers were desperate to buy homes and willing to pay more. Some even spent more than a
home’s value, which drove up the market prices.
If the recession happens and home prices fall, they won’t fall to levels as we saw during the
housing crisis, causing homeowners to be upside down on their loans. Instead, the values may
fall back to where they ‘should’ be, which doesn’t leave most people owing more than their
home’s value.
Supply is Still Low
A recession may cause lower demand for housing, which isn’t bad. Right now, demand still
exceeds supply, keeping prices elevated. If demand falls, it will equal the supply or close to it,
evening out the playing field.
When supply is much lower than demand, it causes problems. In this case, the recession could
help the housing inventory, giving the market a larger supply and equalizing the market.
It Would Still be a Good Market for Buyers
You might wonder, should you hold off on buying a home if a recession hits?
In some cases, homeowners should hold off on buying a home, but today’s recession is
different. The Fed normally floods the economy with money to stop the recession. This time,
however, the recession is a good thing because it will stop the crazy inflation we’ve had the last
year.
So should buyers buy a house in a recession?
Here’s what to consider:
• Do you have the money to put down? A decent down payment is the key to loan
approval today.
• Do you plan to stay in the home for at least a few years, so the market has time to
settle?
• Is your employment steady, or are you at risk of losing your job?
• Do you qualify for an affordable interest rate?
Final Thoughts
A recession isn’t necessarily a bad thing for the real estate market. On the contrary, it might
make housing prices more affordable for more buyers and keep the bidding wars to a minimum.
If you’re in a good financial position and know you want to invest in a home for at least a few
years, this could be a great time to get into the market without the excessive demand driving
prices too high.
If you’re ready to explore your options for buying a home, contact me today. Together let’s
create a plan to help you achieve your dreams of owning a home.