According to Curbed’s Jeff Andrews, the 2008 financial crisis was both a bonanza and an anomaly for anyone who managed to hold onto their job, savings and credit score. Why? Those lucky few were able to buy one or multiple homes at bargain prices.
Not so, if or when a “next” recession hits. Why? According to Andrews, a “next” recession would be a fairly standard recession having little or nothing to do with mortgages or the housing market per se. Why? A 2019/2020/2021 recession would be the difference between a tight mortgage credit environment and a 2008 loose mortgage credit environment and a current housing supply shortage versus a 2006 housing supply surplus.
Certainly the housing market could/would be impacted by a “next” recession but, home prices tend to be less responsive to “normal” recessions (not caused by the housing market as in the 2008 outlier recession) simply because housing is considered to be an absolute need.
Are there any scenarios in which buying a home might make sense in a “next” recession? Andrews says yes.
- IF you’ve already saved up enough to put down a down payment, you are ahead of other buyers.
- Gen-Xers and Boomers are in the best position here because they came of age after the 2008 financial crisis, unlike the Millennials who came of age during the financial crisis.
- Those Gen-Xers and Boomers have had the time to build up their savings while Millennials have not.
- Usually, recessions include upticks in unemployment, so those with steady, recession-proof jobs have an advantage here because having a steady income is a PLUS when it comes to qualifying for a mortgage. (A down payment is one thing…being able to make monthly payments is another.)
- Those with savings for a down payment who lose their jobs may have trouble qualifying…again, being able to make monthly payments without a job can be iffy and today’s creditors don’t like “iffy.”
- Recessions could persuade some homeowners (particularly those who lose their jobs or go from two to one household incomes) to sell, downsize and/or tap into equity and therefore, could help put a dent in historically low supplies.
- IF you’ve help from family who can buy the house outright, go for it.
- If your family can help with just the down payment, there are still monthly mortgage payments to make, it’s best to wait for a steadier employment market.
- If you’ve enough savings for a down payment, it’s still best wait, earn the interest on those savings and buy when a regular, steady income is assured.
- IF you’re looking at coastal markets…
- Know that the East Coast markets of New York, Boston and Washington DC are fairly stable and unlikely to see price drops. Philadelphia’s market is a bit softer so perhaps focus there.
- Know that West Coast markets (California, Oregon, Washington and Colorado) are already seeing supply spikes, so perhaps, look to these markets for price drops as specific locations in those markets may be due for price corrections.
Thanks to Jeff Andrews of Curbed.