Whether you’re wanting to buy your first home, or you’ve been thinking about getting into the market as an investor, the question of timing can make a big difference in shaping your home-buying experience. First and foremost, the timing has to be right for you, but there’s also the question of timing the market right. And along with getting to know your local market, there’s the bigger issue of what it means to buy real estate during a recession.
Should You Buy During a Recession?
Many buyers have mixed feelings about this question. On the one hand, it can be scary to make such a big purchase during an economic downturn. At the same time, buying during a recession can be a great investment. That’s why Consumer Reports concludes that, as long as you can afford a home, and you have a job with income security, being in a recession may be a good opportunity for first-time buyers.
Another key tip from Consumer Reports is to find a real estate agent that you can count on. When you work with a company like BRC Real Estate, you don’t have to wonder if you’re getting a good deal. You’ll know that you’re working with someone who has the experience needed to navigate the current market.
Set Your Budget and Line Up Financing
When you’re serious about finding a home, you need to set a realistic budget, and you’ll be even better off if you get pre-approved for a mortgage. This step is especially important because, as Investopedia points out, you aren’t the only bargain hunter looking. Getting pre-approved for a loan means you’ll be prepared to make an offer, reducing the chance that someone else beats you to it.
Some first-time buyers rush through this step, but it’s worth taking the time to compare loan types to find the one that’s right for you. For example, an FHA loan may be a good choice for first-time buyers who have a lower down payment or who need an option that’s easy to qualify for (even with less than perfect credit). If you’re buying an investment property, you’ll probably be better off with a conventional loan.
One perk of conventional loans is that they usually have lower interest rates, plus if you have a down payment of at least 20 percent, in most cases you won’t have to pay for mortgage insurance.
Choose Your Location Wisely
It doesn’t matter if you’re buying a home to settle down in or one to rent out as an investment property - choosing the right location is a top concern either way. If you have a location in mind, it’s a good idea to research the market in that area to get a feel for what’s available in the neighborhoods you prefer. For example, homes in Lakewood have a median time on the market of just 7 days; this tells you that you need to act fast when you find “the one.”
At the same time, all buyers should remember that buying a home is an investment. Forbes notes that there are many factors that determine what makes a property a good investment for its location, and these factors are highly dependent on your local market. This is another reason why you want a good agent working for you - because they’re experts in your local market!
If you’re buying a property solely as an investment, there are a few issues to keep in mind. Because we are in a recession, the biggest risk to investing is lack of cash flow, especially if you buy in an area where unemployment is high. That’s why U.S. News recommends finding a property where you can expect immediate cash flow to be greater than your expenses.
So, is NOW the right time to buy? If there’s one question that first-time buyers worry about most, this is it. For buyers who have a stable financial situation, plus the patience to find the right property in the right location, the answer is yes - there’s no need to wait for the recession to pass.