With COVID-19 launching the global economy into a recession, today’s buyers and sellers are looking for real estate tips specific to the economic downturn. Should you buy? Sell? Wait to see what happens?
Your best course of action will depend on your unique circumstances, and you’re certainly welcome to contact us with specific questions. But we can give you some general tips for navigating today’s real estate market in light of the COVID Recession.
Here are three real estate tips for an economic downturn.
1. Understand What the Downturn Means for Your Local Housing Market
An economic downturn doesn’t necessarily mean your local housing market will cool. Local markets respond uniquely, depending on local factors. Consider employment opportunities as an example. If your area enjoys a strong jobs market, as is the case with so many Californian cities, your housing market will likely retain its value through the recession. But if your area loses a high number of jobs due to the recession, home values will almost certainly decline, meaning you may want to sell before prices drop lower.
It’s also worth noting that the housing market, as a whole, responds differently to different recessions. The Great Recession of 2008, for example, brought the housing market to its knees because the recession originated in the mortgage industry with subprime loans and overextended homeowners. The 2020 COVID Recession is entirely different and is not impacting the housing market as severely. In fact, as of this writing, the American housing market is still gaining value.
So you don’t have to assume an economic downturn will mean lower values for your home. Take a moment to review the market in your area, and contact a real estate agent professional for customized market projections before making any big decisions.
And once you review your area, don’t wait to take action. The market is constantly fluctuating, and no one can predict tomorrow’s markets with 100% accuracy. Real estate is a long-game, so don’t be swayed by short-term gains and losses. If you want to make a move, do it!
2. Now Is a Great Time to Refinance Your Existing Mortgage
If there’s one constant with recessions, it’s low interest rates. Interest rates for 30-year fixed mortgages are currently at an all-time low, meaning you could save some serious money on your mortgage by refinancing. The exact amount you could save depends on your current loan balance, but in many cases, the savings can be several hundred dollars per month and tens of thousands of dollars over the life of the loan.
And with these historic interest rates, now could be the perfect opportunity to tap into your home equity. Cash-out refinancing can be used to leverage your home equity into cash. This cash could be useful for paying off higher-interest debts (like auto loans or student loans), launching that business you’ve been dreaming of, or even buying an investment property. Which leads us to the third of our real estate tips for an economic downturn…
3. Consider Buying Your First Home, Upgrading Your Home, or Buying an Investment Property
We discussed low interest rates as a reason to refinance your existing mortgage, but these low interest rates also make this a great time to buy. Did you know that a 1% drop in interest rates can add $30,000 to your buying budget? So you could have an extra $30,000 in buying power in 2020 compared to 2019!
If you’ve been considering getting on the property ladder or upgrading to a bigger, better home, now might be a good time, depending on the home prices in your chosen neighborhood. And if you’re happy where you are, perhaps now is the time to purchase an investment property. As you probably know, rentals produce monthly income, appreciate over time, and come with tax breaks. You could even find a killer deal in markets where values have temporarily dipped due to the economic uncertainty of the recession.
If you have questions about specific real estate moves you’re considering during this recession, contact us today. We’re happy to discuss your unique situation and provide custom real estate tips for an economic downturn just for you.