Buying a house? In this economy?
Hear me out.
But it might not be a bad idea. Experts told NextAdvisor’s Katherine Watt it might even be an opportunity to get into homeownership at a better price.
A recession could lead to lower home prices, or it might not. The housing market is slowing down, which means you won’t have to compete with everybody and their siblings, cousins, and Facebook friends just to get an offer accepted. You might even be able to get a seller to come down on the price, or pony up for some mortgage points to buy down those high interest rates.
The risk, of course, is that you might not be able to afford that house. The reason nobody likes recessions is that they could mean you lose your job, or see your income drop, or someone in your family could get laid off. That’s why if you decide to jump on the opportunity to buy a home during one, you need to make sure you can afford it.
Of course, we might not be in a recession. We won’t know until a group of economists make that determination.
And if we aren’t in a recession, well, keep the same approach.
The truth is, the decision to buy a home should boil down to two questions:
Am I ready to buy a home?
Can I afford it?
If the answer to either question is no — whether the economy is booming or busting —then pause and figure out why. This strategy works when the housing market is hot and when it’s cold. It works if you’re in a big market or a small market; if you make a million dollars a year or $35,000; it’s timeless.
My wife and I bought our home five years ago. We knew we were ready (the year-old leak in our rental apartment ceiling made that clear), and we bought a home with a payment we knew we could afford even if one of us lost a job (that happened; the mortgage was never a worry). We knew home prices were rising in the neighborhood we lived in and wanted to stay in, but we were patient and found one for a good deal.
If you’re worried about affording that house, take this advice from Ali Wolf, chief economist at the real estate data firm Zonda: Don’t start looking at the top of your potential price range. “Talk to a loan officer and see what you qualify for, and then ratchet that back,” she says.
Sure, you don’t want to push your budget during tough economic times, but the times don’t matter. You don’t want to push your budget, period. If you’re ready to buy a house and can afford it – and those are big, life-defining ifs – don’t worry about what else is happening in the world. Worry about what color you’re going to repaint the bathroom.