Every day, it seems that concerns about the coronavirus mount higher—as do fears of an impending recession. Homeowners who have been planning a sale during the typically bustling spring market might be wondering what to do.
We asked the experts what to expect if a recession hits, and what that means for the real estate market. Whether you’re currently trying to sell your home or considering putting your property on the market soon, here are a few factors to keep in mind if a recession actually takes place.
1. What happens to home prices during a recession
This is probably no surprise but it may still hurt to hear: In an economic downturn, homes tend to sell for lower prices, says Roger Ma, a New York–based financial planner and owner of lifelaidout.
“If the market is softer and there’s decreased demand, the price that you may be able to command may be less than what you would have imagined,” he says. “It could be less than what you paid, and the net amount that you receive could be less than the amount that you put into it.”
2. Is the timing right for you?
Since recessions bring fewer buyers and a drop in home prices, if a recession hits and you don’t need to sell, it might be a good idea to wait until the economy improves, says Hadi Atri, owner of Re/Max Executive in Charlotte, NC.
Nonetheless, listing a home during a recession may be a must for some homeowners: They may need to move because of a job transfer or family circumstances, says George Ratiu, senior economist for realtor.com®.
“So, it’s less about trying to time the economy or the market and more about making a personal decision,” Ratiu says.
“Try not to focus on the market timing; focus on your own timing,” Ma adds.
3. Are you buying and selling at the same time?
If you’re buying a new home at the same time you’re selling, the financial gains and losses of a recession may even out.
“Oftentimes, if you’re the seller, you might be realizing lower prices, and that might be painful to you,” Ma says. “But on the flip side, if you’re selling at a lower price and then you’re going to be in the market to buy something, you’re going to get that at a lower price, too.”
If you must sell your home during a recession, Fiona Petrie, executive vice president and managing director of Re/Max Integra, says moving that money to other real estate is the wisest investment.
“If you’re selling to put money into something else [such as the stock market], don’t do it,” she says. “But, if you’re selling in a suppressed market, and you’re moving your money in the same kind of market elsewhere, it is not a bad time to sell. Real estate is tried and true, and I don’t know if there is a better investment out there.”
4. How to price a house during a recession
During a recession, Petrie says, the reason a house might not sell usually has to do with an inflated price.
“Sellers need to be realistic on what the value of their home is, and they need to put a home to the closest projected price as possible,” she says. “If the home is priced properly, it will sell.”
A home value estimator can help you determine the home’s going rate. But consider this number a ballpark starting point; you’ll need a real estate agent to also run an analysis of recent home sales in your area to guide you to the right price.
5. Make the home move-in ready
During or before a recession, cash-strapped buyers will not only be price-sensitive and hungering for a deal, but also reluctant to buy a fixer-upper or any house that needs a lot of work (and the heavy reno budget that goes with it). As such, recession-era home sellers should try very hard to make their house look move-in ready.
Even small repairs, updates, or renovations, like a fresh coat of paint or landscaping, improve the product you’re offering and could drive buyer interest. They also might bring in a higher sales price and help the home sell faster, Ratiu says.
“These renovations could differentiate your house from others on the market,” Ma says. “If you see some disheveled house that just looks old, looks like it needs a lot of work, as a buyer, you’re thinking, why would I waste my time with this when there’s so much other stuff that’s move-in ready?”