How To Avoid The Next Real Estate Downturn As A Homebuyer
As a homebuyer, it’s important to always be prepared for the next real estate downturn.
While the real estate market has done well in recent years, it can be difficult to know when things are about to take a turn for the worst. Several experts predict that the next recession is likely to hit in 2020. If this turns out to be true, it’s important to be prepared.
Though it can be daunting to purchase a home during a recession, there are several things you can do to avoid the negative effects of the next real estate downturn.
Let’s take a look at the steps you can take to prepare yourself to buy your home when the real estate market takes a dive.
When you purchase a home, you should always look at it as an investment. Ideally, your home will appreciate in value over time. This gives you the chance to sell your home for a profit in the future.
However, appreciation is never a guarantee, especially during a recession. This means that buyers have to be more selective while hunting for their new home.
You also have to consider your ongoing upkeep and maintenance costs. Larger properties, in particular, will require owners to spend a lot more money in these areas over time. This can be a bigger issue when a recession hits. If you want to sell your home, but aren’t able to sell it for a profit due to current market rates, you will have to keep paying these expenses until the market bounces back.
Shop For Mortgages With Caution
In terms of planning for a real estate downturn, mortgage rates should be one of your top priorities. In fact, as recently as 2018, mortgage rates and home prices rose at the fastest rate in recent years.
A common practice in the mortgage industry is to approve borrowers for the maximum amount that they qualify for so that they can purchase their home with the lowest possible down payment.
However, this can cause buyers to go way over their home budget. Instead, it’s important to be realistic about your budget and decide how much you can afford before meeting with any lenders.
Additionally, buyers need to be thorough in their search for a mortgage to find the best rate possible. Of course, during a real estate downturn, favorable mortgage rates can be hard to come by. But that doesn’t mean you should settle for the first lender that approves your application.
Comparing rates and terms from multiple is the only way to ensure you get the best rate that the market has to offer.
Make a Bigger Down Payment
Lastly, it’s worth considering making a larger down payment than you initially planned, as long as you can afford to do so. This will protect you in case a downturn hits. A larger downturn allows you to build more equity in your new home.
Your new home may not be your permanent home. If you find yourself needing to sell your home during a recession, a larger down payment means you’ll have more money to fall back on after selling your home — even if you have to sell it for less than expected.
A real estate downturn can make things difficult for home buyers. However, following these tips can help you protect yourself when the next downturn hits.