Over the past two years or so, homebuyers have been riding one dizzying roller coaster. What began as a slight uptick in competition for available homes turned into something close to a free for all, with soaring home values and sale prices and shrinking inventory. Desperate buyers began offering premiums, making all-cash offers, and even waiving contingencies and inspections just to get a foot in the property ownership door.
Inevitably, many buyers gave up, frustrated at the lack of available homes in their price ranges and desired locations. Yet continuing to rent also caused some financial stress as rents began to skyrocket nationwide. And now, as inflation drives prices up across multiple sectors, and experts increasingly warn of the risk of a recession, many people are wondering: What’s a stressed-out home buyer supposed to do?
It’s a tough time, to be sure, and it’s not unreasonable to be concerned. However, there are some concrete steps that home buyers can take now to help minimize the impact of any potential recession and to help increase their odds of successfully closing on a home that they love.
1. Clean up Your Credit
For potential home buyers, the very first thing to do to prepare for a recession is to get the overall financial “house” in order. Get copies of your credit report from all three major reporting agencies and evaluate them for inaccuracies and delinquent accounts you can pay off and close. In most cases, you might see a small but appreciable bump in your FICO credit score just from this process.
2. Add to Your Down Payment
You’ll also want to maximize the amount of money you have available to make your down payment on a home you want to make an offer on. That might seem challenging in the midst of soaring prices on everything from food to gas, but there are usually ways you can cut back on nonessentials, even during inflationary periods such as the current one. Eliminate food delivery and eating out in favor of making simpler meals at home. Experiment with turning a few dinners into meatless meals each week, and try out cheaper generic brands instead of the more expensive name brands you usually choose.
You can also add to your down payment by increasing your income. Many people are looking for second jobs they can do in addition to regular employment. Some may explore ways to moonlight as a freelancer during off hours and weekends. Adding to your income can usually help grow your down payment fund even more dramatically than cutting expenses. If you can put all the extra income you make from your additional work into your savings, you might find yourself with a substantially larger fund to work with. That can help you secure better financing for a home you want to buy, saving you additional money in the long run.
3. Don’t Hesitate
The real estate markets nationwide are beginning to stabilize, which means more buyer-friendly conditions (although it’s still considered a seller’s market). With available inventory expanding, you’re more likely to find a house you like in the area you’re interested in, even if interest rates are rising. Make sure you can live with whatever terms you’re considering, but always keep in mind it’s possible to refinance when conditions improve.
If you’ve been trying to buy a house for a while, it’s tempting to give up and walk away. Remember that your competition—that is, other home shoppers—is shrinking, since many of them also felt the same way. Frustration drove many of them out of the process entirely. That can work in your favor now. The key is not waiting around for “things to get better” since you might be waiting for a long while.
4. Get Realistic
It’s not uncommon for home shoppers to have a slightly unrealistic set of expectations when it comes to the type of home they can afford to buy. Use one of the many helpful online calculators to figure out a range of home prices that fit your budget, your available down payment, and your likely interest rate. Your mortgage lender may also want to see up to several months’ worth of mortgage payments in savings, in addition to your down payment.
Do what you can to manage and temper your expectations, then look for homes within your target range. While you’re looking, work to add to your available savings so you can qualify for a mortgage for the property that really hits all your major shopping points.
5. Get the Professional Help You Need
Home buyers can easily get overwhelmed in tumultuous markets. The best thing you can do to help yourself win at the home shopping game is to find an experienced real estate agent in your chosen area who can help you sort out your options, pinpoint potential properties that meet your needs, and negotiate the best possible deal. A realtor who is familiar with the local market conditions is an invaluable ally in your quest to buy a home.
Don’t Give Up!
A recession doesn’t have to spell the end of your home shopping quest. Recessions typically don’t last terribly long, with most recent recessions lasting about 10 to 18 months. Don’t give up too soon, since inventory will continue to become more readily available in many markets. Commit to the goal, which is finding the right home for you and your family at a price you can live with, and stay the course.