The current economic status and real estate market can feel daunting in 2022. As far as real estate is concerned, the market is actually seeing a necessary rebalancing to make for an overall healthier market. This rebalancing can have implications for homeowners across the country. Look no further for our top tips on how to navigate a real estate recession as a homeowner.
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Where we are headed
When talking about real estate market recessions, it is natural to want to compare where we are headed with where we’ve been in the past, in particular the market crash in 2008. Professionals state that our current climate is not like that of the market some 14 years ago. During the devastating recession in 2008, homeowners were lacking in equity. This led to risky lending and in return mass foreclosures. Today, homeowners have lots of health equity in their property, making the issues in 2008 a thing of the past.
However, we are heading into recession territory. Currently, there is a flood of sellers entering the market for fear they are losing equity. This is making an inventory boom (which in recent times has been lacking). The increase in inventory is lowering property value overall, making bidding wars a thing of the past, and actually making now a decent time to buy a home (realizing refinancing for a lower rate is always an option in the future).
What does this mean for homeowners?
During any recession, it is always a good idea to think about your financial health as a homeowner. Building financial stability will ensure you can weather any storm that is to come. This means preserving your property equity.
The current situation is lowering equity for many homeowners, but not wiping it away. A great way to maintain your equity is to invest in your property to increase your assets. Focus on improvements with a high return on investment.
How long do recessions last?
The good news about a recession is they don’t last forever. It’s hard to say exactly how long each specific recession will last, as history shows varying lengths. However, we do know that they typically are somewhat short-lived. For example, the 2020 recession offered a huge spike in unemployment due to the pandemic, but this only lasted a few short months. On the flip side, the Great Recession in 2008 lasted some 18 months.
Be prepared
As a homeowner there are things you can do to ensure you are prepared for the real estate market recession:
- Assess your financial health and ensure you are living within your means
- Review your budget and make cutbacks where you can
- Work at paying off any high-interest debt you may be carrying
- Increase your emergency savings
- Look for additional sources of income (think about getting a side hustle)
- Keep investing in stocks and 401(k) accounts