On nearly every media outlet, there’s an ongoing discussion about when the next recession will be. As we’re already approaching the end of 2020, some wonder if the next economic downturn will be in 2021. The national economy is slowing down and could enter into a recession next year due to the “disorienting, distracting and dizzying” events of 2020, according to Bernard Baumohl the chief global economist for the The Economic Outlook Group.
He then said that a recession is “90% likely if there is no effective vaccine until late 2021 or early 2022 and there is no comprehensive stimulus bill.”
Even consumers who have managed to maintain employment are afraid of the economy right now. They are afraid of losing their jobs and afraid for their loved ones who may need their help, and they are less likely to spend money. With nearly 27 million Americans receiving some form of assistance, that’s a huge increase from the 1.4 million of last year, and mortgage delinquency is near a 10-year high.
The U.S. GDP is predicted to shrink 5% in 2020, according to Baumohl’s forecast, and GDP growth is largely unpredictable but hopeful over the next two years.
How Will the Next Recession Affect the Housing Market?
During the Great Recession in 2008, there was a complete crash of the housing market. That was likely due to the fact that the housing bubble essentially caused that crash. Many homeowners found themselves underwater on their mortgages and began defaulting in the face of a stock market crash and huge layoffs.
It’s not likely during the next economic downturn that the housing market will crash, or at least not in a way that’s anywhere close to that level. Housing prices only dropped in one of the past four recession. Lax lending practices were a big reason the housing market was decimated during the last recession, and there are regulations in place to prevent that now, more than ten years later.
Should You Buy a Home During a Recession?
If you are thinking about buying a new home anytime soon, doing so in a recession may actually offer you advantages. For example, markets surrounded by the factors of an economic downturn are often described as a buyer’s market.
When there’s a recession, homeowners may be more likely to sell because they can’t afford their mortgage, or they need liquidity out of their home. This makes them more motivated to sell, and you may find lower prices or better deals. Selling their home for a lower price may also be the only way to avoid foreclosure.
Of course, there can be downsides of buying a home during a recession. For one, it’s tougher to get financing in an economically challenging environment. Lending requirements are more rigorous, and you may be expected to have a higher down payment. Also, when there’s a recession, investors tend to come out in droves to find great deals, and they may be all-cash buyers, so you’re competing against that.
If you’re considering buying during a recession you need to not only have strong nerves, but you need to be confident you’re not going to face a layoff, and that you’re going to continue to be able to pay your mortgage.
If you are strong in your financial standing, and you’re looking for a great deal, a recession can be a good time to buy a home, but you need to think long and hard about whether that’s the right option and if you’re willing to take that kind of risk.
Current Economic Conditions are Strong
At the present time, mortgage rates are remarkably low, housing inventory in most states across the U.S. is also quite low, creating a seller’s market where cost of housing tends to be high, not many sellers listing their homes and houses are selling rapidly. If you are buying or selling now, do your homework to get the best Realtor® in your market who is most likely to make the best deal possible for you and move through the offer and closing process quickly. Mortgages rates are at record lows, so this is an excellent time to get into a house if you’re renting and if you find the right home for you or your family; also if refinancing is of interest to you, this is a great time to do that.
If you’re interested in selling, it’s quite likely you’ll sell quickly at a great price right now – it’s not called a “seller’s market” by accident.
If you’d like to find a partner in your real estate journey, contact EffectiveAgents,com today to select a top real estate agent in your community based on their actual performance and record of success.
Photo Credit: fran-hogan-t-Yatdo406c-unsplash