As a real estate agent/broker that likes to talk to people at my
local Starbucks, I can't help but notice the question I seem to be getting
asked most often these days...are we going into a recession? And what do I
think that will mean for the real estate market?
Despite the going consensus,
none of us Realtors have a crystal ball, although many seem to think that we
do:) I have to admit, I tend to lump this question in with the 'is now a good
time to buy/sell?' queries that are so common in my industry. So I think it's a
good time to address some of the concerns and possible outcomes if we indeed
find ourselves in this unfortunate position. What's most interesting to me is
that you can ask the 2 smartest people in the room, and they'll disagree with
each other on which direction we're heading! Again, no crystal ball! With that
said...
As would be expected, if/when the economy enters a recession, it
can have a significant impact on the housing industry. Let's look at some of
the ways in which consumers may be affected--
Decreased demand: During a recession, consumer
confidence tends to decline, leading to reduced purchasing power and a
decrease in demand for real estate properties. Fewer people are likely
to buy homes, invest in commercial properties, or engage in real estate
transactions.
Falling property values: With reduced demand,
property values may decline. Homeowners and real estate investors may
experience a decrease in the market value of their properties, which can
lead to financial losses and reduced equity.
Increased foreclosures: During a recession, job
losses and financial difficulties can lead to an increase in
foreclosures. Homeowners may struggle to make mortgage payments,
resulting in a higher number of distressed properties on the market.
Tighter credit and lending standards: Lenders may
become more cautious during a recession, tightening their credit
standards. Obtaining mortgages or loans for real estate purchases may
become more challenging, limiting the number of qualified buyers in the
market.
Slow construction activity: During an economic
downturn, new construction projects may be put on hold or canceled due
to reduced demand and financial constraints. This slowdown in
construction activity can affect the supply of new properties entering
the market.
Increased rental demand: As homeownership becomes
less attainable for some individuals during a recession, the demand for
rental properties may increase. This can be beneficial for landlords and
property owners who can continue to generate rental income.
Opportunities for investors: While a recession
can bring challenges, it also presents opportunities for real estate
investors. Distressed properties may be available at lower prices,
allowing investors to acquire assets at a discount. Some investors with
available capital may be able to take advantage of these market
conditions to expand their portfolios.
It's important to note that the specific impact of a recession
on the real estate industry can vary depending on the severity and duration of
the economic downturn, as well as other factors such as government policies and
market dynamics. This leads me to my answer - The BEST time to make a move is
when it's the best time for your special circumstances. Do you have significant
equity in your home and need to access the capital? Do you have medical or
other financial needs that could be impacted if a market goes against you? Do
you have the burning desire to leave your present living situation? The answer
to these, and many other questions, should determine whether it's the right
time for you and your family to make a move. It's the big picture that needs to
be looked at. I tell people to make a list of pro's and con's and see where
their heart leads them. In the end, we have to live with ourselves and our
decisions. And it's not always about finances. In the end, it's about our peace
of mind...
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