According to research from Realtor.com, almost 30% of homebuyers admitted that they would be more likely to buy a home during a recession, with 63.4% noting that they felt a recession was possible within the next year.
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On the other hand, only 15.8% shared that they would be less likely to purchase a home during a recession. While it’s difficult to predict what will happen in the economy, the belief is that if the economy were to enter a recession, the Fed would have to respond by lowering interest rates, which could help with housing affordability concerns.
Here are top reasons why it may make sense to buy a house when the economy is down.
The Market Favors Buyers
“Buying real estate in a downturn is one of the rare moments when the market tilts in favor of the buyer,” said Paul Carassone, real estate expert and co-founder of Carassone Properties. “When the economy softens, consumer sentiment tends to freeze up, but that’s exactly when opportunities emerge.” A recession could allow potential homebuyers to enter the market as interest rates finally cool down and sellers become more motivated.
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Another significant benefit for buyers is that they have time to make a decision instead of rushing into a home purchase. “A market slowdown gives buyers more time to make decisions, conduct inspections and avoid the pressure of rushing into a purchase,” said Alexander Kalla, realtor. When you have time on your side, you don’t have to rush to make a decision on the most important purchase of your life. You also don’t want to purchase a property without a proper inspection because that could cost you thousands of dollars in repairs.
An economic downturn could also benefit buyers looking to purchase their first home, especially those who have been saving for a long time. With money saved for a down payment and lower interest rates, mortgages could become more affordable for a wider range of Americans.
Sellers Are Open to Negotiations
Carassone pointed out that sellers become more open to negotiations because the competition thins out and properties that might have sparked bidding wars in a stronger market can be acquired at a discount. With fewer buyers in the market, there’s less competition and sellers may be more open to price reductions or concessions. This means that buyers can often secure better deals.
Your Investment Can Increase Substantially
“You’re not just purchasing a home, you’re positioning yourself for significant equity growth when the cycle inevitably rebounds,” Carassone explained. If you’re financially stable and ready to become a homeowner, a recession is often the most strategic time to buy property because you’re setting yourself up for the future.
Kalla mentioned that buyers focused on long-term goals can make significant gains when buying in a downturn, as home values recover over time. While your primary residence shouldn’t always be viewed as an investment, you could enjoy significant appreciation in the home value when the economy rebounds.
Real Estate Can Be Seen as a Safer Investment
Ryan Barone, co-founder and CEO of RentRedi, said during a recession, homebuyers may view purchasing a home as a less risky long-term investment than investing in the stock market. With the stock market swings and volatility that investors have experienced over the last few years, it may make sense for someone to choose to invest in a tangible asset, such as a property.
Investors may also feel they can get better deals on rental properties if prices and interest rates are falling. If you’ve been considering purchasing an investment property, the recession could help you land a place, especially if more listings go up. You could invest in a home that you can turn into multiple units and focus on building up your portfolio.
Real Estate Could Increase Your Income
Buying a home can also create additional revenue streams, which could be helpful during a recession. Even if you want to live in your home, you can rent out portions of it to boost your income and make your mortgage payments more affordable. “The most lucrative way to do this is renting out extra bedrooms to people looking for cheaper renting alternatives to getting their own apartment,” Barone said.
You can also rent out other spaces, such as garages, driveways, basements, attics, parking and storage, on different platforms. The monthly rent can add up and help you with the mortgage payments. You’re not only providing yourself with a place to live, but you’re increasing your income, which can help alleviate financial concerns that come with a recession.
While there isn’t a guarantee that the economy will tilt into a recession, it helps to know that you have options for improving your financial situation regardless of what’s happening around you. As always, we recommend that you research all the costs associated with buying a home so that you’re aware of what you’re getting into.
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This article originally appeared on GOBankingRates.com: 5 Reasons To Buy a House When the Economy Is Down