There's a lot of talk about whether or not we're headed for a recession. Some economists say that we are, while others say that it's unlikely. But what does this mean for people who are thinking about buying a house?
Our team of real estate professionals weighed in to help us explore the pros and cons of buying a home during a recession. There's a lot to parse out - from what this could mean for home prices and interest rates to long-term home values.
If you're thinking about buying a house in Texas now, read on to get the full picture and make the best choice for your home and financial future!
How's the housing market looking in Texas in 2022? As you may know, it's been red hot and things have yet to slow down significantly. In fact, home prices in Texas have been rising steadily for the past few years in response to historic housing demand.
Additionally, there's been some great news for Texas home buyers, as inventory rates are finally coming up. In the past few years, inventory has been low, leading to sky-high prices in the local market throughout Texas.
You may have heard the phrase "housing bubble" thrown around to refer to recent high housing costs. But what does that actually mean?
A housing bubble occurs when housing prices go up too quickly and then eventually crash. This can happen for a variety of reasons, but it often happens when people are buying houses they can't actually afford.
The good news is that experts don't believe we're currently in the midst of a housing bubble. Prices have risen in response to limited supply, in part due to home builders scaling back during the pandemic.
Meanwhile, existing homes in major cities are seeing high prices as a result of bidding wars and higher demand. So if you're thinking about buying a house in Texas now, you're not likely to see prices crash in the near future - even in the case of a recession.
A recession is a period of temporary economic downturn during which trade and industrial activity are reduced. A recession is generally considered to occur when there are two consecutive quarters of negative economic growth.
In 2022, economists believe the U.S. economy will likely fall into a mild recession by the end of the year as the Federal Reserve raises rates to tame prices.
There can be many different causes for a recession, but most often it is the result of an overheated economy. When the demand for goods and services exceeds the available supply, inflationary pressures can develop. This can lead to higher interest rates and increased uncertainty, which can eventually lead to a decrease in consumer spending and investment.
A strange confluence of factors makes it hard to predict where the U.S. economy is heading. Since the pandemic began over two years ago, we’ve experienced a prolonged labor shortage, supply chain disruptions, and chaos in the energy market. These factors, along with rising inflation could trigger a recession.
Recessions typically cause a decrease in home prices and sales volumes as people become more cautious with their spending. Additionally, recessions usually lead to an increase in foreclosures as people struggle to make their mortgage payments. It can also impact mortgage rates.
If we are headed for a recession, home prices could start to drop. However, it's important to remember that this would happen slowly over time. It's unlikely that we would see a sharp decrease in prices like we did during the last recession.
And this can be good news for potential buyers! If you've been frustrated by the high prices in housing markets across the state, some relief may be on the horizon.
However, it's tough to say for sure that prices are headed for a drop, as there are many factors that can affect home prices during a recession. In fact, some experts believe that home prices could actually go up during a recession - although this is by no means guaranteed.
With so much uncertainty, if you’re currently in the position to buy a home, you should disregard the noise and continue with choices that make the most sense for you and your family. That means if you’re already approved, there’s no reason to pause or delay your search for your dream home.
There are pros and cons to purchasing a home during a recession. Let's take a look at each side:
-Recessions can actually be a good time to buy a house. Since there are usually fewer buyers during this time, you may be able to find a great deal on your dream home.
-Your mortgage payments will likely be lower during a recession than they would be during an economic boom. This is because interest rates tend to fall when the economy slows down.
-There may be more inventory, which can keep home prices lower. This is because people might be selling their homes during this time due to job loss, foreclosures, etc. So if you're looking for a deal on a house, this may be the time to buy.
-There's always a risk that your home could lose value during a recession. If the market crashes, you may end up owing more on your mortgage than your home is worth.
-It may be harder to get approved for a mortgage during a recession. rs may be more cautious about approving loans, so you'll need to have good credit and solid employment history.
Regardless of how things play out with a recession or fluctuating home prices, several things stay the same. If you’re trying to buy a home in Texas it’s important that you get pre-approved, maintain good credit, start preparing your down payment funds, and gather all relevant documents needed for funding a mortgage loan.
The more prepared you are now, the better your chances of greeting a great deal on a home - whether a recession hits or not.
If the recession is expected in 2023, it could mean the housing market will have to cool off for a longer period of time than in the past. However, most economists predict that any upcoming recession will be mild. And with the strength of the recent housing market, changes are likely to occur slowly.
While prices might not change drastically during a recession, home buyers might see some positive outcomes when it comes to mortgage rates. In the past couple of years, we've seen rising interest rates again after historic lows.
However, mortgage rates are likely to go down if we enter into a recession. This is because the Federal Reserve will lower rates in an effort to stimulate the economy.
However, it's important to remember that interest rates are just one piece of the puzzle. While waiting for interest rates to drop may sound like a good plan, if you’re prepared to buy now you might now want to wait and pin your hopes on a volatile future market.
So should you buy a house in Texas now or wait until after the recession? Ultimately, it depends on your individual circumstances. If you're confident in your financial situation and think you can find a great deal, buying during a recession may be the right choice for you, however, there’s no reason to delay.
While you shouldn’t worry about the implications of buying if the recession hits, you also shouldn’t plan to wait the economy out, as the housing market is ever-changing.
If you're thinking about buying a house in Texas, you're not alone. The housing market in Texas is booming, and there are plenty of reasons to buy now.
Ready to get started buying a home in Texas? The first step is to talk to an experienced lender. They can help you understand your options and figure out what's best for your unique situation.
At Texas United Mortgage, we have over 30 years of experience helping people finance their homes. We know the ins and outs of the mortgage process, and we're here to help you every step of the way.
Contact us today to get started!