The Pros & Cons of Buying a Home During a Recession

Are you thinking of buying a home but worried about the current economy? You're not alone. The recession has made it more difficult for people to get mortgages, and some potential homebuyers are afraid that prices will continue to fall. But buying a home during a recession can have its advantages, too. This blog post will discuss the pros and cons of buying a home during a recession. So if you're on the fence about whether or not to buy, read on!

What is a recession?

A recession is defined as two consecutive quarters of negative economic growth. In other words, the economy shrinks for six months or more. This can be caused by several factors, including increased interest rates, falling home prices, and rising unemployment. While a recession can be painful for businesses and consumers alike, it's important to remember that it's just a part of the business cycle. Like winter followed by spring, every recession eventually comes to an end.

What are the pros and cons of buying a house in a recession?

While it's true that prices may be lower during an economic downturn, there are several other factors to consider before taking the plunge. For starters, lenders may restrict their lending guidelines, making it harder to qualify for loans during a recession. Additionally, job security may be more uncertain, making it challenging to keep up with mortgage payments. Finally, the housing market is notoriously cyclical, so there's always the risk that prices could rebound just as you're trying to sell. Of course, there are also potential benefits to buying during a recession. For example, you may negotiate a lower price on the home or get more favourable terms on your mortgage. So while risks are involved, there can also be rewards for those willing to take a chance.

Is it a good time to buy a house during a recession?

Even though interest rates are high right now (compared to the last few years), they likely won’t be forever. Typically during a recession (and keep in mind we are not currently in a recession), rates tend to decline drastically to stimulate the economy. Additionally, many people are selling their homes at discounted prices, so you may be able to find a property that is priced below its market value. Of course, it's important to be mindful of the risks of buying during a recession, such as the possibility of job loss or income reductions. However, if you are financially stable and have your eye on a particular property, don't let the current economic conditions deter you from making an offer. 

What impact does a recession have on house prices?

I’m going to leave this one to the pros in that area! My best advice is to work with a trusted Real Estate Agent on finding you the right home, within your budget! Don’t know what that budget is? That’s what we’ll figure out for you first, before you start shopping.

The cons of buying a house during a recession:

If you're thinking of buying a house during a recession, there are a few things you should know. First of all, it's important to remember that recessions don't last forever. So if you're worried about the market crashing, don't be - history has proven that it will eventually rebound. However, that doesn't mean that buying a house during a recession is always a good idea.

Here are a few things to keep in mind:

1. Mortgage rates tend to be volatile in recessions. So you can expect the market & lender conditions to change frequently and without notice.

2. Home prices tend to be lower during recessions. So if you're looking to buy a property, you may be able to get it at a bargain price. However, keep in mind that prices could also continue to fall, so there's no guarantee that your home will appreciate in value.

3. Job security is often lower during recessions. So if you're thinking of buying a property, make sure you have a stable job and income first. Otherwise, you could end up losing your home if you can't keep up with mortgage payments.

4. Lending standards are often tighter during recessions. So if you're looking for a mortgage, be prepared to jump through some hoops - like providing more documentation or having a higher credit score.

The pros of buying a house during a recession:

1. Rates tend to decline during a recession

2. Many people are selling their homes at discounted prices, meaning you may be able to scoop one up for less than market value!

3. Potential for more negotiating power when making offers to purchase.

All in all, there are both pros and cons to buying a house during a recession. It's important to do your research and talk to both a mortgage agent and realtor before making any decisions, as both will be able to provide industry insight and knowledge for your unique situation.

At The Mindful Mortgage, we work with both major banks and other lenders to get you the best mortgage possible. Our services are free (except in the most challenging credit situations, but any fee would be discussed Up Front!). The best part? You’re getting expert advice from an accountant/mortgage agent who puts you first, not a banks bottom line.

Click Contact Us at the top of the website to book a Free, no-obligation Discovery Call today. You can ask me any and every mortgage question and get real advice based on your unique situation.

Written December 2022