In the second half of 2022 we have seen a lot of news about a housing market correction. Recently, I attended a social event and several people cornered me to ask, “Should I sell my house before the market crashes?” Honestly, it depends on your circ*mstances.
Decision whether you should sell your house now, sell during a recession, or wait until 2023 depends on how well your home meets your current needs. There are benefits and consequences to selling a home before or during a recession which I will share with you, here. In the instance selling makes sense for you I included some tips about how to sell your house in a recession, too.
What’s a Recession?
A recession is a period of time with slow or negative economic growth. Measuring if the economy is in a recession has become more difficult.
Economists have begun to define a recession in one of two ways. The traditional academic definition of a recession is two more or more consecutive quarters of weak or negative gross domestic product (GDP) growth. Recently, some economists believe this single metric does not accurately reflect if a recession is present.
Recently, a recession is defined by evaluating several factors together to determine the overall trend of the economy from the perspective of both Wall St. and Main St. These variables include:
- Gross domestic product (GDP)
- Wage growth
- The prices and price trend of everyday consumer goods
- Unemployment rate and directional trend of the unemployment rate
- Manufacturing and industrial output
- Price trends of high priced items purchased by the masses such as homes and automobiles
Is It a Good Time to Sell a House?
You may be asking should I sell my house in 2022? Overall, 2022 is a good time to sell a house. And, I predict 2023 will be a good time, too.
The driving factor which will continue to support real estate values is the high demand for entry level and mid-tier homes. Currently, there are about 44,500,000 people between the ages of 25 and 35-years-old which are prime ages for buying a first home and trading up from the first home to a second home. Unfortunately, far too few homes were built to meet the needs of these homebuyers.
Pros and Cons of Selling a Home Before a Recession
More frequently we are seeing the word “recession’ included in economic headlines. So, you might be asking should I sell my house before a recession? Here are some of the reasons to sell your home now in 2022.
Reasons to Sell a Home Before a Recession
There are several reasons why it can make sense to sell your home before a looming recession arrives. Getting ahead of economic carnage and selling a home before a recession has these benefits.
- Best Price – Home prices are typically at their highest during a time of economic expansion which is the opposite of a recession. If you want to get the highest price for your home, aim to sell the home at a time of economic exuberance. On the other hand, during a recession consumers become defensive and are not as willing to pay as much for everything including a home like yours.
- Larger Active and Qualified Audience of Homebuyers – The audience of active, qualified homebuyers is largest during good economic times. Homebuyers are earning and consuming with a low risk of losing their job.
- Relieve Financial Stress – Selling during a recession can be a good option to pay-off debt. It is not uncommon for some people to get over leveraged during times of economic expansion. If you feel like you are overly in debt, selling your home with its appreciated value can help you pay down or pay off debt.
- Avoid Getting Trapped – Housing needs change based on where you are on the spectrum of life. Consider selling your home before a recession if it appears in the near future you will need to make a change to right-size your home for your needs. We can stop life or aging or fully-control our health, but you can sell your home in anticipation of needing a home that is a better fit for you.
Consequences to Selling a Home Before a Recession
There are several consequences when selling a home before a recession. Most of those consequences are related to replacing the home you had just sold.
- Sell High, Buy High – You can benefit from the high prices of selling before a recession. However, we all need to live somewhere. The home you buy to replace the home you sold will also likely be at the top-end of the market.
- Higher Interest Rates – If you will sell a home and then buy a home before a recession you may pay a higher interest for the new mortgage than what you were paying on the mortgage for the home you sold. This is due to the fact mortgage rates are typically higher during a time of economic expansion before a recession.
- Competitive Buying Market – Before a recession there will be many homebuyers. Therefore, you will face more competition when buying a home to replace the home you sold. You may find it more difficult to buy the home you want.
Scenarios Which Make Sense When Selling a Home Before a Recession
There are several scenarios which make selling a home before a recession a great idea. If you match any of these you should think seriously about selling your home now.
The Home is Not Your Primary Residence
Selling a second home, inherited home, or investment property before a recession is a great idea. First, before the recession you will not suffer the consequences felt when replacing the home. This is because the home is not your primary residence.
You’ll Buy the Your Next Home with Cash
If you intend to purchase your next home with cash, selling and buying during a recession can be a good idea. Though mortgage interest rates are typically higher before a recession you will not need to pay that higher rate because you are buying with cash.
You’re Current Home Isn’t Meeting Your Needs
Avoid getting trapped in a home that does not meet your needs by selling before a recession. Whether you have a growing family, are aging and needing less, or want a shorter commute if the home is not meeting your needs get it sold before the housing market turns negative.
The Home Needs Repairs
Selling a home in need of some repairs is easier during good economic times. If your home needs some repairs or likely will need major components in the near future consider selling the home. Get ahead of a soft economy and sell the home before a recession.
Pros and Cons of Selling a Home During a Recession
It can be difficult to sell your house during a recession. However, there may be reasons why the sale needs to occur. Below are both sides of the argument whether you should sell your home during a recession.
Benefits of Selling a House During a Recession
- Unload a Depreciating of Underperforming Asset – Selling a house in a recession gives you the opportunity to sell a depreciating asset. Real estate values typically fall during a recession. Longer and deeper recessions will have the greater effect on home values. Selling today could help you from selling at a lower price in the future.
- Remove Mortgage Indebtedness – Selling a home will remove the debt burden of needing to make the mortgage payments. This can be helpful when in a recession because in the instance you are having money problems and can not pay your bills. Sell your home instead of taking a negative hit on your credit report or even a foreclosure.
- Trade-In for a Better Opportunity – Selling a house in a recession can give you the opportunity to buy a home today with more upside potential in the future. Homes which meet minimal needs for shelter depreciate the least in a recession. On the other hand larger homes with a lot of features can experience large reductions in value. Therefore, a recession is actually an excellent time to upgrade to a larger home or a home with more features.
Consequences when Selling a House During a Recession
- Lower Home Prices – You will likely get less money for your home when selling a house in a recession. Home prices will fall as the number of homes increases while buyers’ participation in the market stays low.
- Fewer Buyers – Home sellers need to do more to attract a homebuyer when selling a house in a recession. This is because there are fewer qualified homebuyers in the market. You will be more difficult for home sellers to get away with selling a home that needs work or is in marginal to poor condition.
- Buyers Can Be More Demanding – Homebuyers will be more demanding during a recession. Home sellers are likely to experience lower offer prices, more demanding inspection responses, and requests for closing concessions when selling a house in a recession.
Are You Buying and Selling at the Same Time?
Many people ask if they should sell a house before or during a recession. A huge part of answering this question relates to how you will replace your housing needs once you sell the home.
If you are planning to buy a home immediately upon selling your home, selling and buying before a recession is typically better for most people. However, the exception would be those who are trading up from an entry-level home to a larger home with more features. Those sell-to-buy clients would likely do better selling in a recession.
On the other hand, if you are going to sell a home and do not need to immediately buy a home, selling your home before a recession is best. When only selling you want to sell at a time when the market favors home sellers. This would be before a recession.
Tips for Selling a House in a Recession
Instead of spending so much time arguing the timing of when to sell your home you should focus more on how to sell your house in a recession. The tips are applicable both during a recession or not. These tips can always help you achieve your home sale goals regardless of market conditions.
If It’s Broke, Fix It
Most buyers will get a home inspection, so what’s broken will be discovered. Control the outcome of this by having a pre-listing inspection. Then, work with your real estate agent to learn which items most homebuyers are likely to ask to be repaired. Next, get those items repaired before listing. Lastly, have the inspector update the report after the repairs have been completed.
Little Things to Make Your Home Look More Expensive
Selling a home for top dollar in any market has a lot to do with increasing the home’s aesthetic sentiment. Aesthetic sentiment is the feelings and judgements we make upon seeing an image or experiencing an environment. There are many little things you can do, low cost, DIY items which will make your home look more expensive.
Accurately Price the Home
Overpriced homes don’t sell in any market. Price your home within a reasonable range in order to get buyers in your home. By the way, younger buyers don’t like to haggle.
There is a real generational gap occurring in real estate sales. Older sellers say, “Well, buyers can make an offer.” Sorry, Boomer, it just doesn’t work that way any more. Younger and younger buyers want to buy a home more like buying a pair of shoes. Price the home within a reasonable range for comparable homes so that your customer can buy the way he or she wants to buy.
Work with a Great Real Estate Agent
First, hire a real estate agent. Yes, that comes at a cost, but I’ll cover that in the next section. Real estate agents have the best resources to maximize the exposure of your home to the marketplace. Secondly, hire a great real estate agent. A great real estate agent has the following characteristics:
- Full-time real estate agent with experience with homes like yours
- Asks questions and listens to your answers about what you need and want from the home sale
- A good balance of working with both homebuyers and sellers recently
- Excellent communication skills and will return your calls or reply to texts and emails quickly
- Experienced agents with at least 50 completed transactions in the last three years
- Great marketing skills
Save Money with a Low Commission Real Estate Agent
Many new real estate business models have come to the marketplace over the last five years. If you want to save money on real estate commission fees look for a low real estate commission fee agent in your area.
Me and the Quadwalls Real Estate Team are low commission real estate agents in Indiana. We offer a full-feature listing service and low real estate commission fees.
Wait to Sell Your Home If…
A phenomenon I have observed is how housing has gone from shelter to investment. Being a homeowner has always been a great investment, but it should be thought of as shelter first. If any of these apply to you it might not be worth selling your home now regardless of economic conditions.
You Like Your Home
If your home is working for you there is no reason to make a change. If your home is the right size in the right location with the right features for you you should not sell your home. Replacing your home should be more about needing something different or an aspirational attainment of a better home. If what you have meets your needs stay put.
You Can Afford Your Home
Do not sell your home because of economic conditions if you can afford your home. You should not be too concerned about whether we are in a recession or not and your home’s value if you can afford your home. It’s better to be in a port during a storm, so stay roped to their pier.
Your Have Stability in Your Life
If your life is quite stable it probably does not make sense to sell your home out of fear of a coming recession. Think about your work, relationships, and other personal parts of your life. If all of that is going well, selling your home to get ahead of a recession doesn’t make much sense.
You Don’t Have a Use for the Proceeds
Some homeowners think about selling in order to cash-out their big gains after seeing their home value increase. However, if you do not have anything useful to do with those proceeds there is no point to sell the home.
Conclusion
A recession is a period of time of lower economic activity and reduced or negative economic growth. A recession can affect home values and the housing market. Selling a house before or during a recession has benefits, but it has consequences, too. Homeowners should carefully consider their options and needs when deciding to sell their home.
The Quadwalls Real Estate Team includes many of the best real estate agents in Northwest Indiana. We can help you understand your home’s value in the current market and evaluate what would be good options for you. Feel free to contact us any time.
