About six months – that's how much longer, as of now, the current economic expansion is compared to the previous 120-month record set in the 1990s. Yet, as time stretches, forecasts and speculations about an impending recession abound.
Amid trade disputes and political ambiguities, the Federal Reserve has slashed interest rates twice this year alone, triggering concerns for an upcoming economic downturn, even if Federal Reserve Board Chair Jerome Powell has offered an optimistic outlook.
Still, recessions elude clear-cut predictions. Conventional indicators, like the inverted yield curve, or the negative spread between the 10-year and 2-year Treasury bonds, occurred earlier in 2019. Yet, other factors such as the unemployment rate, mortgage rates and construction levels remain healthy.
“None of us have a crystal ball to predict or know exactly if and when a recession is going to come,” says Frank Nothaft, chief economist with CoreLogic. “You can never rule it out. The risk of a recession still is pretty low for the next 12 months.”
While Nothaft says the nation’s economy is most likely to continue growing into 2020, albeit at a slower pace, consequential disruptions such as a starved oil supply, a monetary policy error or slowing global markets may spur a recession in the U.S.
But what does this all mean for the housing market?
With record-low mortgage rates, real estate appears to chart a steady course in a stark contrast to the homebuying frenzy that precipitated the Great Recession over a decade ago.
Today, the housing market may even be the buoy that keeps the economy from dipping into a recession because of the tight availability of homes.
“Right now, we are facing a housing shortage, not enough homes for the population growth,” says Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors. “So, homebuilders need to build more, housing (starts need) to rise. When housing (starts) and homebuilding activity rise, generally we don't have an economic recession.”
According to the U.S. Census Bureau, seasonally adjusted housing starts in August totaled nearly 1.4 million, or some 6.5% more than a year ago. Meanwhile, building permits – at about 1.5 million – are 12% above the rate in August 2018.
If a downturn does materialize in 2020, Yun expects it to be shallow and short. Home sales may dwindle, but prices might resist a drop. Home prices fell in only two of the five recessionary periods since the 1980s.
Statistics aside, a survey released by realtor.com and Toluna Research in August shows that 36% of active home shoppers expect a recession in 2020, while 17% think the downturn may come earlier, in 2019.
But what are homebuyers to do in the months of uncertainty leading toward a potential recession?
Well, if we now live in the pre-recessionary period, home shoppers, Nothaft says, should consider taking advantage of its rare confluence of characteristics.
“It's a very good housing market right now,” he says. “And I'll tell you one of the reasons for it. This is the first time in the post-World War II period, that we have (an) unemployment rate below 4% and at the same time we have mortgage rates below 4%.”
Here are several personal factors to take into account when a home purchase coincides with national economic anxiety:
- Personal finances
- Housing needs
Purchasing a house is a major financial decision – especially in a volatile market. An economic slowdown, for example, usually triggers layoffs, impacting one’s ability to repay loans and amass savings.
“It is important for a family to feel financially secure” Nothaft says. “If they are worried about losing their jobs; if they're worried about a recession, then they should hesitate. They shouldn't necessarily jump in and make a big commitment to buy the most expensive thing they're probably ever going to buy.”
Home shoppers ought to also expand their budgets for any repairs or renovations that often present themselves in newly bought homes – a necessity that could further muddle a home purchase decision.
While applicable to any market condition, such considerations particularly resonate today, when the starter-home inventory is again shrinking, and prices, in most locales, keep edging up.
What could be worse than buying a home beyond one’s means – present and future – is being saddled with mortgage payments for a depreciating house.
While, nationally, home values are projected to maintain an upward trajectory, some local markets may experience price dips. The slowdown of the oil-reliant industries of North Dakota and the stagnation of exorbitant-price metros such as Seattle and San Francisco serve as examples of local economies where the housing sector may be poised for a correction.
Thus, parsing local trends and grasping granular differences between cities – neighborhoods, even – could prevent a home purchase from going sour in a recession. It might also afford shelter for one’s wealth during an economic whirlwind.
Combined with its location, the home itself contributes to its owner’s ability to build equity. To do so, though, the size and shape of a house should bear desirability but also reflect the market conditions.
“I think that buyers will sit on the fence in an uncertain time, until they know that there is value in the home they're trying to purchase,” says Lois Kirschenbaum, associate real estate broker with Daniel Gale Sotheby's International Realty in New York. “They're not going to overpay.”
As a result, in slowing economies, houses with “aspirational prices” languish and the real estate sector turns into a buyer’s market, where sellers offload their properties at terms favorable to shoppers. Still, homebuyers should warily evaluate their housing needs and assemble a long-term budget in order to avoid becoming another motivated seller when economic uncertainty morphs into a recession.
The commitment to a new home should encompass an understanding of personal and market factors that an economic downturn could exacerbate as well as a degree of readiness for such a possibility.
“It may be next year, maybe it's two years, maybe three years from now, before you are faced with a recession, before you are faced with job loss," Nothaft says. "But if you've done your homework, then you will be prepared to weather even those difficult periods where you're under financial distress.”
The current national real estate outlook – even if possibly pre-recessionary – appears favorable, both Nothaft and Yun agree.
“Given the low interest rate environment today, and the fact that home prices, in my view, will be rising, I will say if a person is financially ready (to buy a house), they should take advantage of the situation,” Yun says.
Ensure a quick sale.
Selling your home quickly not only allows you to move on with your life, it also means fewer days of keeping your home in pristine condition and leaving every time your agent brings prospective buyers for a tour. According to real estate information company Zillow, the best time to list a home for sale is on a Saturday between May 1 and 15; homes listed during those times sell six days faster and for 0.7% more than the average annual home price. A National Association of Realtors survey published in July found that the average home was on the market for 27 days in June, compared to 2012, when the average time on market was about 11 weeks. But how fast your home actually sells, and at what price, depends on factors beyond timing. Here are 10 secrets to selling your home faster, no matter when you list it.
Updated on Aug. 2, 2019: This story was originally published at an earlier date and has been updated with new information.Take great photos.
Take great photos.
According to NAR's 2018 Profile of Home Buyers and Sellers, 44% of recent buyers started their search online. Of those, 87% found photos very useful in their home search. If your listing photos don’t show off the features of your home, prospective buyers may reject it without even taking a tour or going to the open house. Hiring a professional photographer and posting at least 30 photos of your home, inside and out, is a good way to attract buyers. Photography is often free for home sellers, as shoots are often conducted at the expense of real estate brokers as part of marketing the property.Clean everything.
(People Images/ Getty Images)
Nothing turns off buyers like a dirty house. Hire a company to deep clean if you can’t do it yourself. “When the (home) is on the market, no matter what time of day or night, it should be clean and neat,” says Ellen Cohen, a licensed associate real estate broker with real estate brokerage Compass in New York City.
Key places to clean while your home is on the market include:
- Kitchen countertops.
- Inside cabinets and appliances.
- Floors and room corners where dust collects.
- Bathroom counters, toilets, tubs and showers.
- Inside closets.
- Windows, inside and out.
- Scuffed walls, baseboards and doors.
- Basement and garage.
Depersonalize the home.
Remove all your family photos and memorabilia. You want buyers to see the house as a home for their family, not yours. Remove political and religious items, your children’s artwork (and everything else) from the refrigerator and anything that marks the house as your territory rather than neutral territory. The same goes for any collections such as figurines, sports memorabilia or kids' toys that can make a buyer think less about the house and more about you. Family photos can be replaced by neutral art or removed entirely – just be sure to remove any nails and repair nail holes where any hanging photos used to be.Let the light in.
Let the light in.
People love light and bright, and the best way to show off your house is to let the sunshine in. Open all the curtains, blinds and shades, and turn lights on in any dark rooms. If the natural light situation is lacking in any room, strategically place lamps or light sources throughout to set the mood. And while your house is on the market, open all curtains and turn on lights every time you leave your house for work or errands in case you get word a buyer would like to tour the space before you get home.Make your home available.
Make your home available.
Buyers like to see homes on their schedule, which often means evenings and weekends. Plus, they want to be able to tour a home soon after they find it online, especially in a hot market where they're competing with other buyers. If your home can be shown with little or no notice, more prospective buyers will see it. If you require 24 hours’ notice, they may choose to skip your home altogether. "That's one less person who gets to see the property," Cohen says. Be ready to leave quickly as well – if you're still cleaning up or hanging around outside when the buyer arrives, it can make for an awkward interaction.Set the right price.
Set the right price.
No seller wants to leave money on the table, but the strategy of setting an unrealistically high price with the idea that you can come down later doesn’t work in real estate. Buyers and their agents have access to more information on comparable homes than ever, and they know what most homes are worth before viewing them. A home that’s overpriced in the beginning tends to stay on the market longer, even after the price is cut, because buyers think there must be something wrong with it. "Pricing correctly on the lower side tends to work much better," Cohen says.Remove excess furniture and clutter.
Remove excess furniture and clutter.
Nothing makes a home seem smaller than too much big furniture. Rent a self-storage container or a storage unit and remove as much furniture as you can. It will immediately make your home seem calmer and larger. Remove knickknacks from all surfaces, pack them away and store the pieces upon which you displayed them. Take a minimalist approach to books, throw rugs and draperies, and clear off your kitchen and bathroom countertops, even removing appliances you normally use. If you can scale down the contents of your closets, that’s even better, because it makes the home’s storage space look more ample.Spread the word.
Spread the word.
Your neighbors are often the best salespeople for your home because they love the neighborhood. Make sure they know your home is for sale and are invited to your open house. Also share your listing on social media and ensure your real estate agent does the same. Share the news on neighborhood email lists, Facebook groups and other social media outlets. Collaborate with your real estate agent to promote your home's listing information through multiple accounts. Especially if you or your agent has a decent pool of social media followers, Cohen says, "You can promote properties for nothing."Repaint in neutral colors.
Repaint in neutral colors.
A new coat of paint will do wonders to freshen up your home, both inside and out. This is the time to paint over your daughter’s purple bedroom, nix the quirky turquoise bathroom and cover up the red accent wall in your dining room. Busy wallpaper can also turn off potential buyers. Your goal is to to create a neutral palette so buyers can envision incorporating their own personal touches in the home. "You just want people to see the space for what it is," Cohen says. Rather than a stark white, consider neutral shades of gray, taupe and cream on the walls.Spruce up the front of your home.
Spruce up the front of your home.
You’ve heard it 100 times before, and it’s still true: Curb appeal matters. You don’t get a second chance to make a first impression. A new or freshly painted front door, new house numbers and a new mailbox can breathe life into your entryway. Fresh landscaping and flowers in beds or in pots also enhance your home’s first impression. Trim trees and bushes, tidy up flower beds, remove dead leaves from plants, clear out cobwebs from nooks near the entrance and pressure-wash walkways, patios and decks. Leave the outdoor lights on, too, because prospective buyers may drive by at night.Here are 10 tips to sell your home faster:
Here are 10 tips to sell your home faster:
- Take great photos.
- Clean everything.
- Depersonalize the home.
- Let the light in.
- Make your home available.
- Set the right price.
- Remove excess furniture and clutter.
- Spread the word.
- Repaint in neutral colors.
- Spruce up the front of your home.