If you're waiting for a recession and home values to drop before you buy a home...
There's three reasons why that could be a big mistake.
Over the last few years We've heard a number of people very frequently saying "I'm going to buy a home, but I'm going to wait for this next recession. I'm going to wait for home values to crash before I buy."
I guess the thinking is that what happened during the Great Recession, 10 years ago is something that's going to happen again, and going to happen very soon.
And the thing is we've been hearing things like this since 2015.
And we've had plenty of clients that have bought during 2015 or 2016, home values have been increasing, they've been able to pay down the principal, sell their home and they move on to another home a bigger nicer home all in this time period.
Meanwhile, there's someone else, delaying buying a home, waiting for a recession, thinking to themselves, "I'm just gonna keep paying rent and I'm going to keep waiting for home values to drop."
Watch This Video For The 3 Reasons Maybe You Should Stop Waiting
3 Reasons Why Waiting For A Recession To Buy A Home Could Be A Big Mistake
Stop Waiting For A Recession To Buy A Home (Reason #1)
96 different economists asked about how likely an upcoming recession is and how does that impact home values. Most of them agreed, Yes, there will be a recession coming and it will might most likely happen in the next 18 months, but it probably will not impact home values, very much if at all.
Their prediction is that home values are still going to go up by 4.8% in 2019
2.8% in 2020
2.5% in 2021
3% in 2022
3.4% by 2023
So according to the economy experts, home values are going to be slowing down, with not much appreciation, but there won't be a real estate market crash.
Stop Waiting For A Recession To Buy A Home (Reason #2)
The second reason why it's probably a mistake to be waiting for a recession to buy a home is that homeowners are not putting themselves into trouble by taking cash out of their property.
What was happening during the last Great Recession - I was in real estate during that time - is homeowners were using their properties their homes like a piggy bank, an ATM, they're going back and refi- ing.
Pulling money out taking expensive vacations, buying nice cars. Basically the equity left in the home was zero.
That's not happening this time.
So for example in this article on CNBC, it reads:
"The collective amount of money borrowers could pull out of their homes, while still retaining 20% equity, hit a record $6.3 trillion in the second quarter of this year, according to a new reading from Black Knight, a mortgage data, technology and analytics company.
Homeowners, however, are sitting on their equity more than they have in the past. Just $54 billion in equity was withdrawn in the first quarter of this year. That is the lowest volume in four years and the lowest share of available equity tapped since Black Knight began tracking the metric in 2008. Less than 1% of tappable equity was withdrawn."
Less than 1%.
Homeowners have a lot of equity in their home. They're very house rich and they're leaving it there.
Not like people did in the Great Recession where they're using their home as an ATM pulling it out and living more extravagant lifestyle than what they could really afford because the equity in the home was allowing for that to happen.
It seems this time around homeowners are a lot more savvy and not making that mistake.
What that means is, even if home values drop, current homeowners have so much equity in their home, they don't have to panic and sell their home for less.
Stop Waiting For A Recession To Buy A Home (Reason #3)
And the third reason why it's probably a mistake to keep waiting for that recession before you buy real estate comes from a podcast from the financial website fool.com.
The topic of this podcast was the 8 things that happen a recession hits.
During topic, number four, they shared,
"The price of your house actually might go up. I think a lot of us were stung by the Great Recession, and that was really the first time we saw a nationwide drop in home prices. The truth is, when you look at recessions historically, home prices actually hold up well. There was a study by Mark Hulbert, and he published it in MarketWatch, where he found that when you look at the Case-Shiller Index of home prices, it actually does better during stock bear markets than it does during stock bull markets. Historically, in most cases, your house is actually a good hedge against a recession, against inflation, and a stock market drop. However, during the Great Recession, what we saw the last time, that was not the case. There will always be outliers. But generally, houses hold up pretty well."
Are You Going To Keep Waiting For A Recession?
If so, that's cool.
Buying a home is a big deal and you shouldn't do it until you feel ready and comfortable.
But if any of these three reasons makes sense to you, and you see how they could be costly mistakes...
You'll also want to check out our Costly Mistakes Home Buyers Make guide.
THIS COSTLY MISTAKES GUIDE WILL:
Help you understand credit scores and Debt to Income Ratios
The financial benefits of having a mortgage
Why your first home probably shouldn't be your dream home
The biggest myth that keeps people from buying and costs them money