Recession Information Center: Buying a new home in recession

Recession Info Center

Recession tips: Buying a new house in recession

Careful research as you go about buying your new house during the recession is as
important as it has ever been. Buyers should keep in mind that housing prices are still falling
in many localities, and given the recession, they may continue to fall in the short-term.
Many still argue that the prices will keep falling at least in the near future because they are
still too high compared to fundamentals like incomes and rents. Having said that, the
combination of attractive interest rates and availability of lots of choices may provide an
optimal opportunity for some despite the recession. As a home buyer, you should consider
the following suggestions:

Buyers' market: Given the ongoing recession, today's housing market is
undoubtedly a buyers' market. Most sellers are by necessity more flexible about
pricing. The prospective buyers, therefore, should understand and take advantage of
the leverage they have in negotiations.

Do your homework: Understanding the price trends in the area where you intend to
purchase your house is very important, and it's even more important now given the
recession. While home prices seem to have generally fallen nationally due to the
housing crash and the recession, some localities have experienced sharper than
average drops, notably in some areas in California and Florida, while in other areas
the prices have been flat or have even risen. In this environment, the would-be
buyers can greatly benefit from a comprehensive local research on the prices and
their trends. Particularly, those considering buying a home in foreclosure or at
auction should do plenty of research.

Financing: Given the increasing rate of foreclosures and mortgage defaults as well
as the ongoing recession, it is no secret that banks have tightened lending standards
significantly, often requiring great credit scores as well as higher down payment
rates. Looking to see if you are eligible for financing should be among the first steps
for would-be-buyers.

Understand the realtors' incentives: Recession or not, in all interactions with
realtors, would-be-buyers should keep in mind that realtors do not make commission
unless there is a transaction. This often motivates the realtors to highlight the
advantages of buying a house in the current and dismiss the potential disadvantages
and risks. Doing your own research and contacting objective professionals is critical.

Save for down payment: Given the ongoing recession and the housing crisis,
lenders need to have to be able to make a sizable down payment in order to qualify
for low mortgage interest rates - often anywhere between 10-25% of the price. So if
you are serious about buying a home, you should start saving.

Finally as always, talk to professional advisors.

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