With the global economy headed for a major recession, this could be a good time to start thinking about buying a house. After all, prices will likely be low so you may find some bargains.
Is it that cut and dry, though? Is it actually wise to buy during a recession?
There are a lot of things to know about buying a house even in the best of economies, but things are a little more complicated when the economy is in tatters.
In this article, I will give you some food for thought before you buy a house during a recession. Both the reasons for, and some against that you should keep in mind.
Understand foreclosures and short sales
There are going to be a lot of homes on the market that have either been foreclosed on by the bank, or are in a short sale.
Neither one should be a deal breaker, but you do have to know what you are getting into if you decide to buy a house in either of those scenarios.
A short sale should be done with the help of a service like OhioShortSaleCenter.com to navigate the process as there are usually multiple lenders. It can be done and may make sense to buy a house cheap like this, but it can be complicated as there are a lot of moving parts.
In a foreclosure, the bank owns the property and it is usually sold as is. You may be buying your dream house for a good price, or you could be buying a headache.
Search an area where you want to live
Don’t just look at house prices as you may find some bargains, but they aren’t in an area where you would want to live.
For instance, there may be a lot of foreclosures in one particular area that would probably be a sign that it is depressed there and wouldn’t be increasing in value anytime soon.
Look around for some bargains in a place that might be better economically a lot sooner. Even a foreclosure in that area would be better as you are more likely to see your property value rise along with the economy when it does rebound.
Take advantage of lower rates
To spur home sales and help the real estate market, banks will issue some very low interest loans. In addition to the lower asking price for many homes during a recession, you can save even more by borrowing at this time.
Even a drop of just a couple of percentage points in the rate can save you a few hundred per month. Extrapolate that through the course of the loan and you can see just how much money that can save you.
Stay put for a while
If you don’t love the area where you end up buying, then you may be stuck there for a while.
It can take longer than expected for the property value to increase. You can’t be in a rush to leave as you would have to sell either at a loss or at least break even in which case, you are out of the closing costs and other fees.