Real Estate Article: Is it Smart to Buy During a Recession?
11/19/2007

The real estate cycle is one that is nearly impossible to predict accurately. We will never know exactly when the market has reached its peak or exactly when it has hit rock bottom and is on its way to recovery. What we do know are the trends in the mentality of buyers during different parts of the cycle.

Buyers tend to become anxious when prices have consistently increased for a period of time. People notice that prices are rising and they see an opportunity to flip properties for a quick profit or purchase a home that they feel certain will appreciate in value. In the same sense, when housing prices have gradually decreased for a period of time, buyers tend to get scared out of purchasing a property. They are uncomfortable with the idea of purchasing a property that will be likely to decrease in value in the near future.

As a buyer, if you are always waiting for the golden opportunity to purchase a home, then you will end up never purchasing a home. I mentioned earlier that it is impossible to predict exactly when the real estate market will hit rock bottom. If you keep waiting for that day, it might be too late when you do decide to purchase. Instead, I believe that a buyer can take advantage of the market, regardless of its status.

Although our economy is currently experiencing a recession and housing prices are dropping, there are still many reasons why a buyer should purchase a property. It just depends on their motive for buying. If you are an investor looking to make a quick profit, buying a property that is decreasing in value is obviously not in your best interest. However, if your purpose for purchasing a property is to have a principal residency, then you should purchase a property regardless of whether prices are falling or not. Keep in mind that you do not actually lose money unless you sell your property for a loss. If you are not planning on selling the property anyways, you have nothing to fear. Of course, if you wait around prices may drop even further but that is something that is uncertain. What is certain is that if you purchase a property now, you will be purchasing at a lower price and you will have a comfortable home for you and your family to live in. In fact, since the peak of the real estate cycle in mid 2006, prices have already dropped 15%. This is a substantial change in price and buyers should be more than happy to purchase at such a price.

In addition, it is also a good idea to purchase during a recession because many sellers begin to get anxious. They know that they are not going to get a great deal, but at the same time they are afraid that things could get worse in the near future. For this reason, they may be more so inclined to work with you on finding a mutually agreed upon price.
Keep in mind that a recession works in your favor as a buyer. You may not be purchasing at the cheapest possible price, but you do know that you are buying at a cheaper price and at the same time you will obtain a home for your family, something that can hardly be compared to any small price fluctuations that may or may not occur in the future.

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