During the Great Recession of 2009, average home prices dropped by over $65,000 during the lowest point of the recession. When you look at numbers like that, you might be asking yourself whether you should sell your home during a recession.
It depends, honestly. It depends on whether or not we’re actually in a recession, other economic factors, your home’s value, and your overall financial picture.
It’s no secret that the housing market has taken a dive in recent months. If you’re like many homeowners, you may be wondering if it’s the right time to sell your home. While there are several factors to consider, here are six things to think about before making your decision.
What Are the Signs of a Recession?
In the United States, a recession is typically defined as two consecutive quarters of negative economic growth. However, several other indicators can be used to identify a recession. These include:
- High unemployment
- Falling home prices
- Declining retail sales
One of the most important indicators of a recession is rising unemployment. During a recession, businesses cut back on production, and many workers are laid off. As more people are looking for work than there are jobs available, the unemployment rate rises.
Currently, however, the jobs market isn’t looking bad. The unemployment rate is up to over 3.5% but is lower than it was a year ago (this is likely due to the pandemic, though).
Another key indicator is falling home prices. When the economy weakens, demand for housing falls, and prices begin to drop. This can lead to a decrease in the value of people’s homes and make it difficult to sell a property.
Finally, declining retail sales is another sign that a recession may be underway. When consumers are worried about the future, they tend to cut back on spending, which leads to lower sales for retailers. Again, this isn’t the case right now as consumer spending is still slightly up.
While these are some of the most common signs of a recession, it’s important to remember that every situation is unique. Other factors can include pandemics, political events, and even natural disasters.
Keep in mind that some recessions may only last a few months, while others can last for years. The best way to understand whether or not a recession is occurring is to track these indicators over time and look for trends.
Are We Currently in a Recession?
By technical definitions, yes. If the definition of a recession is simply two consecutive quarters of negative GDP then the US entered a recession in the summer of 2022.
However, other economic factors don’t point to the fact that we’re in a recession just yet. This could mean that now is the time to sell your house before the economy dips into a real recession and the housing market changes in favor of becoming a buyer’s market.
Because not all economists agree that we’re currently in a recession, it’s good to arm yourself with the facts about the pros and cons of selling a house before a recession.
Pros of Selling a House Before a Recession
There are a few different scenarios in which selling your house before a recession can be advantageous. If you think that you might find yourself in one of the situations below then it might be a good idea to sell your house before a recession.
If You Think You’ll Experience Financial Difficulties
Namely, if you think that you might lose your job or experience a significant decrease in income, selling your house and downsizing to a more affordable home can help you to avoid financial difficulties.
If Your Home’s Value is Likely to Decrease
Additionally, if you believe that the value of your home is likely to decrease during a recession, selling it now can help you to get the most value for your property. However, it’s important to time the sale of your home right to ensure you can sell it for what it’s worth.
If You Think You Might Have to Relocate
Finally, if you need to relocate for work or personal reasons, selling your house before a recession can give you more negotiating power with buyers, as there will be fewer potential buyers on the market.
However, it’s important to weigh all of the potential risks and benefits before deciding to sell your house during an economic downturn. Speaking of risks and disadvantages, let’s explore some of those.
Cons of Selling a House Before a Recession
In general, recessions create a buyer’s market. This is because there is an excess of homes available as demand decreases. Due to higher interest rates, many potential buyers decide to wait to take out a mortgage loan and purchase a home.
This, in turn, decreases demand and forces seller’s to compromise on certain things such as lowering their asking price or having to invest more money into repairs to ensure their home can compete against the other homes on the market.
You May Not Be Able to Sell Your Home for What It’s Worth
With those factors in mind, one of the biggest cons of selling your house during a recession is that you may not be able to get as much for your home as you would during a period of economic growth.
The Home Selling Process Takes Much Longer
Another con of selling your house during a recession is that the process may take longer than usual. This is because there are fewer buyers in the real estate market and more houses for sale.
If you’re patient and willing to negotiate, then you may be able to find a buyer who is willing to pay your asking price.
Despite the drawbacks, selling your house during a recession can be a good way to get rid of the unwanted property and free up some extra cash. Just be sure to weigh all of your options carefully before making a decision.
Selling a House in a Recession: 6 Things to Consider
Taking the pros and cons mentioned above into consideration, you might be thinking that now is the time to sell your house before the housing market gets even worse for sellers. Or, you might still be on the fence about selling a house in a recession.
Regardless of where you find yourself, here are six real estate tips you can consider when selling a house during a recession.
Keep an Eye on Home Prices
The housing market is one of the first places that feel the effects of an economic downturn, and home prices can drop quickly.
For sellers, this can be a problem if they need to sell their homes in a hurry. They may not be able to get the price they want, or they may end up having to sell for less than their home is worth.
That’s why sellers need to keep an eye on home prices during a recession. By tracking the market closely, they can make sure they are realistic about their home’s value and are prepared to adjust their asking price if necessary.
Consider Whether You’ll Buy Another Home
If you are planning on buying and selling a home at the same time then you might want to take a step back and consider your options. Finding a new home during a recession can be a challenge for different reasons.
Namely, interest rates are higher during a recession.
If you are selling your current home and will have to take out a new mortgage loan to cover the costs of purchasing a new home then you can expect to pay higher interest rates than if you refinanced your mortgage in 2020, for example.
Focus on Your Finances
Don’t sell just because you think the real estate market is going to take a hit. If now isn’t the right time for you to sell your home then wait. Consider your overall financial situation and think about whether selling your home is truly right for you.
Focus on your timing. That being said, if you believe that you will lose your job during the recession or will have trouble making ends meet and need to relocate to move in with family then selling before the recession gets too bad can be a great idea.
Ultimately, it’s worth taking a step back to ensure it is the right move for you. Don’t sell simply because you’re worried the value of your home will decrease temporarily.
Recessions are a part of life and if you’re committed to being a homeowner and all of the value that can bring you then get comfortable and sit tight as the recession passes.
Understand How to Price a Home During a Recession
If you’re thinking of selling your home, you may be wondering how to price it during a recession. The most important thing to remember is that you should always price your home according to its current market value.
This can be difficult to determine during a recession, but there are a few things you can keep in mind. First, look at comparable homes in your area that have recently sold. This will give you a good idea of what prices are currently being accepted by buyers.
Additionally, consult with a real estate agent who can help you determine an accurate market value for your home.
Once you have a good understanding of your home’s value, it’s important to be realistic about your asking price. It’s unlikely that you’ll be able to get full market value for your home during a recession, so it’s important to be prepared to negotiate or offer other perks.
However, by pricing your home correctly from the start, you’re more likely to find a buyer who is willing to pay a fair price.
Consider What Buyers Are Looking For
If we’re really in a recession then you’ll notice that demand for houses decreases and it becomes more of a buyer’s market instead of a seller’s market.
They have their fair share of options and that means that you will not only have to price your home competitively but that you’ll also have to cater to their needs. While buyer needs will vary depending on the situation, there are some commonalities that are important to consider.
Namely, as mentioned, buyers during a recession are likely to be more price-sensitive than usual. This means that they will be looking for bargains and deals, so it is important for sellers to be aware of this and adjust their pricing accordingly.
Additionally, buyers during a recession may also be more interested in practicality and functionality over style and luxury. This means that sellers should focus on selling items that are seen as essential or necessary, rather than items that are simply nice to have.
Make the Home as Attractive as Possible
If you want to make sure your home is competitive on the market, make it as attractive as possible. By investing a little bit of money in repairs and upgrades, you might be able to attract high-quality buyers interested in paying what your home is worth.
Ultimately, most buyers are likely expecting your home to be in turnkey condition.
Should I Sell My House During a Recession?
If you’ve read through some of the home selling tips above, you might still be wondering whether or not you should sell your home during a recession. This is a difficult question to answer, as there are many factors to consider.
One factor is how much equity you have in your home. If you own your home outright, or if you have a significant amount of equity, then selling during a recession may not be a wise idea, as you may not get as much for your home as you would during a healthy economy.
Another factor to consider is your financial stability. If you are in a stable financial situation, with a good job and strong income, then you may weather a recession better than someone who is teetering on the edge of financial ruin.
Lastly, it’s important to consider your circumstances. If you are facing foreclosure or imminent eviction, then selling your home during a recession may be your best option.
However, if you have the means to ride out the economic downturn, then it may be better to wait for the market to rebound before selling.
Get a Cash Offer for Your Home
Aside from thinking whether you should sell your home, you have to consider the difficulties and stress of putting your home on the market in a buyer’s market.
Instead of dealing with the stress and hassle of the traditional selling process, consider other options. One of the simplest options is to get a cash offer for your home.
Check out our home value estimator tool to get your free home value estimate. See what we’re willing to pay outright for your home, hassle-free.