Is it a bad idea to sell your home during the recession of 2020? That depends on a few different factors, all of which we will explain to you in this guide.
The circumstances of today's recession are very unique. As such, this report takes a very close look at the specific ways this current economic crisis is impacting, and will impact, the real estate industry. We'll also provide tips for any who are still hoping to sell their current home.
Read on to learn all you need to know about selling a home in the 2020 recession.
How a Recession Affects Consumer Spending
The defining trait of any recession is that there is less consumer spending in general. But, as you know, a recession affects different markets in different ways. While most businesses are struggling, some actually become more profitable.
Besides this, we can't generalize anyway because not all recessions are the same. The underlying reasons that cause a particular recession have a direct impact on which industries are affected and how.
For example, because our current recession is caused primarily by the coronavirus, people feel less safe about ordering prepared food from restaurants. So, while the restaurant business is declining, people are spending more on their monthly grocery bill. Also, online stores and delivery services are at an all-time high.
How a Recession Affects the Housing Market
All of this is to say that, along with the general effects of a recession on the housing market, we'll be looking at the specific economic effects of the current pandemic.
A General Drop In Home Prices
A common part of every recession is that house prices drop. When consumers spend less in general, they spend less on houses, too. The 2020 recession will be no different in this respect, except that this phenomenon may be worse than usual.
The lockdown has shut down most non-essential businesses nationwide. As a result, most workers are out of a job, even if only temporarily.
Therefore, most consumers are in a place of financial instability and uncertainty. Needless to say, all are going to be wary of making any sizable investments at this time. As such, anyone selling their home will most likely have to reduce the price below its previously-assessed value.
An Increase In Foreclosures
Furthermore, those who are struggling to pay their bills during this crisis may have trouble hanging onto their own houses. Fortunately, the government is helping those in this situation by both postponing foreclosures and issuing economic stimulus checks to citizens.
Still, the effect of this economic crisis may still be too much for some people to maintain their current living situation. Even if mortgage payments are halted by the government, other bills might still be too high for those who are out of work.
Thus, it's likely that we'll soon see a flood of low-priced homes hit the market to avoid eventual foreclosure. That, of course, means more competition for home sellers. Then, the average selling price of homes will lower even further.
At the same time, there may be an increase in relocations. As per the above example, many homeowners will want to sell their homes so they can use their equity to compensate for their current economic hardships.
Most likely, they would downsize to a smaller home rather than pay rent. Since they have to sell their own home at a devalued price, it helps that the house they're buying is devalued as well.
Then, this gives them either a more affordable house payment or extra equity cash they can use to square away other recession-related debts. If they have enough equity, they might even get both.
Remember, though, this financial solution only works to compensate for temporary economic setbacks. In the long-run, it's best for homeowners to hang onto their homes if they can get through the recession without selling. Then, once the recession is over, they can sell their home for its full value.
Nicer Homes Stay Valuable
As we said, many will be downsizing to smaller homes to profit from the equity. Therefore, there is still a demand for houses in a recession.
What's more, with an increase of houses on the market, buyers have more options to choose from. Those who are able to buy when prices are low have their pick of the litter, so to speak.
Anyone viewing listings on local online real estate sites, like StewartRealtyLLC.com, will put in their favorite home features and instantly cut the less desirable homes from their search. Then, any homes with very basic features, average homes that are all pretty much the same, will never even be seen. These homes lose more value in a recession because the only way they can compete is via their asking prices.
But nicer homes, homes with more rooms and added features, these will have many more buyers competing over them. Thus, they will retain a decent value even during a recession.
Also, for these reasons, other types of homes, like condos or townhomes, lose far more value than single-family homes. After all, with so many decent houses on the market at such low prices, no one wants to settle for a condo.
Tips For Selling Your Home During the Recession of 2020
Now that you understand a little bit about how the market is right now, here are some tips for selling your home.
1. Do You Have to Sell Right Now?
Unless you absolutely have to sell right now to cover other expenses, it's probably a good idea that you don't. Remember, however good a deal you get right now, your house will sell for less until this recession is over.
Low sale prices can potentially be a good thing, though, if you stand to make a large profit downsizing to an even more devalued home. This way, you can sell the devalued home you purchased at a much higher price after the recession.
All in all, it's possible you'll end up with more in this scenario than you would by hanging onto your current home. The gamble is, there's no way to know how long the recession will last. So you may end up stuck in your new, smaller home for longer than you'd like.
2. Is Your Home Worth Selling?
Besides that, you may already be living in a smaller home that doesn't have a lot going for it. If your home has few rooms, few features, and/or is in need of repairs, get ready to sell low.
A very low price may be all you can do to get it sold. Then, there's not much you can do from there but find a place to rent. It's probably best, then, to keep or improve your house.
3. Home Improvements Are More Valuable in a Recession
Your other option for your meager home is to fix it up ASAP and then put it on the market. No one is going to want a fixer-upper when there are so many other options. And no one is looking to invest during a recession either.
If you're set on selling, you must at least finish any work the house needs to have done first. It will cost you far less to make necessary improvements than to sell as-is.
Your 2020 Recession Home Selling Guide
If you still plan on selling your home during the recession of 2020, keep this guide for reference. Follow these tips to maximize your profits. And, lastly, if anyone you know is thinking of selling right now, please share this post on social media.