If you haven’t seen the financial news lately, let me just sum it up in one word: Worrisome. Well, maybe two words: Very worrisome.
With a tax cut destined to deeply impact the government’s ability to spend in the long-term, a budget (i.e. “spending”) deal valued at $1.3 TRILLION, rising mortgage interest rates, a proposed border wall to pay for, an escalating trade war with the one country that underwrites most of America’s debt, and the Federal Reserve increasingly open to raising rates, it doesn’t take an advanced degree in economics to see that we’re about 12-20 months away from an actual recession.
And it’s one that could really, really hurt.
Even red, white, and blue American business stalwarts like Harley-Davidson are now already taking direct action.
So how’s the recession likely to impact buyers and sellers here in Tuscaloosa? Here are some good tips:
- Prices may begin to drop: Recessions usually cause market prices as a whole to decline but pay attention to specific markets. Hot neighborhoods tend to stay somewhat hot price-wise or only cool off a bit, but, as the recession continues, buyers can gain a significant advantage. Areas that have seen the greatest appreciation tend to see the greatest drops too. Of course, recessions still produce plenty of billionaires and those with great investment strategies usually always pounce when prices are low – for the right homes of course.
- Location is everything: Especially in a recession, buying for location is still – and even more so – a smart move.
- Analyze for opportunities: Since many people who are forced to sell usually suffer big negative equity issues in recessions, the savvy buyer will connect with an agent who can help them seize opportunities to buy homes in prime neighborhoods or with great appreciation upsides for lower than market values. Timing is usually everything and having an agent who can act quickly is critical.
- Cash is king: Getting a mortgage is already like navigating a minefield, so, if you’re sitting on cash and want to make a move in a recession, you could find the deal even sweeter. Plus, cash always helps you move fast to snatch up great deals.
- Pricing your home right is critical: If you must sell in a recession, overpricing your home is a killer. Make sure to understand the trends in your neighborhood, financing climate, how foreclosures may affect your comparable listing and more.
- Financing can be tricky – Literally: When recessions hit, shifty mortgage brokers pop up like weeds. Beware scams and “too good to be true” offers.
- Rent vs sell: Trying to sell in a recession can be costly. Renting is a better alternative if you can afford to wait to move your home. Many homeowners buy new homes in recessions since prices are lower and then rent their old homes out. Housing shortages are a problem now across the U.S. and here in Tuscaloosa. Renting out your place can be a great option not only for the short-term, but many who choose this path see appreciations after a recession on their homes when they go to sell.
- Be sensible: If you’re a seller and a move isn’t necessary, there are much better economic conditions in which to move your home. Sometimes, it’s best to be patient, watch the economy and market and let your agent help you target the right time to sell. Good agents will always do what’s best for their clients no matter what.
In general, buyers and real estate investors tend to be the big winners in recessions. That said, remember that all the usual smart decisions still need to be made when buying (e.g. financing, location, appreciation values, costs of renovations, etc.).
If you’re thinking about buying or selling in the next 12-24 months, proper planning now is vital given that a potentially bad and long recession is forming on the horizon.
Call me today and I’ll help you evaluate what’s best for you. If there’s one thing I’m certain of in a recession it’s that hiring the wrong Realtor® can cost you big-time. It can even cost you your savings or your home.