Many economists are predicting that the U.S. is on the verge of a recession. The stock market has entered a bear market (meaning it’s down 20% from its peak), the Federal Reserve continues to raise interest rates to combat inflation and the housing market boom is beginning to lose steam. But how would a recession impact the 2022 real estate market?
A recent report by Clever Real Estate takes a closer look at this very question and examines how the real estate market could be well-positioned to weather a recession.
The report suggests the following guidance for navigating the real estate market during a recession:
- Since higher interest rates have priced out some buyers, if you sell now, you may be forced to reduce your price. So, wait a few years to sell, if you can.
- If you are waiting to buy, reduce your debt as much as possible in the meantime. When mortgage rates increase, banks become pickier about who they give mortgages to.
- Remember that mortgage rates will come down eventually. Experts are predicting that the Federal Reserve will cut rates in late 2023. If you can’t wait that long to buy, don’t beat yourself up and remember that today’s elevated mortgage rate isn’t much higher than the pre-pandemic 30-year fixed mortgage rate.
- If you’re looking to buy and have cash on hand, know that you will have leverage to negotiate a great deal since sellers will have slim pickings.
- Don’t panic and sell the minute your home value begins to dip. Investors who weather the storm usually emerge in a better position than those who bail when adversity hits.
- If we do enter a recession, job cuts may not be far off. Be sure to polish your skills and make sure you’re an indispensable employee.
The takeaway:
“Although housing prices tanked during the post-2008 recession, they look to be supported by pretty strong fundamentals in 2022 and are likely to weather the storm,” the report stated. “This isn’t as unusual as it might sound. Home prices rose or held steady in three out of the past five recessions. On top of that, the real estate industry has evolved radically over the past decade, with the rise of the iBuyer industry…and innovative real estate companies…helping homebuyers and sellers save on transactions—something especially important amid economic uncertainty.”
To read the full report, click here.
