The current COVID-19 fear has tightly gripped the entire society. And this fear has, needless to say, some serious implications on the global economy. Many international business firms are closing down. Besides many employees are being sent home, and daily wage labour set on a halt. Well, it’s a clear indication of an impending recession in line. So is the view of several economists across the world. And they aren’t entirely wrong in their prediction either. The real estate market is likely to experience a breakdown.
Economists were of the view that the world economy would hit a recession by 2021. However, they now feel that it may just be preponed, considering the current economic situation that’s being gravely hit each passing day by the scariest viruses of our times. In the wake of all this, an important question arises in the mind of the common man – will the housing market be affected? Is this a good time for home buying?
Real Estate Market: Positive Effects of Recession
Could there actually be any positive implications of such a situation? Fortunately, yes! Before analysing in detail the potential connection between real estate and financial crisis, it’d make sense to note the certain pros of buying a house at such a time.
Recession isn’t likely to impact those whose income in the future aren’t likely to drop much, despite the Corona hit. Such investors would still remain confident of their ability to purchase a home despite the turbulent economic conditions. The business sector is one example.
The current economic downturn may witness a huge suppression in demand for homes. The buying trend would see a downfall, primarily because of uncertainty looming over the economic condition. With low demand, prices would also dip. Home buyers could take advantage of this scenario.
Real Estate Market: Negative Impact of Recession
Now let’s look at some disadvantages that a real estate investor could face in these times:
1. Less scope for negotiation:
Recession could leave the investor little or literally no room for negotiation on home prices. This is because the buyer doesn’t get to bargain directly with the seller – he’s going through the bank as the middle-man. During a recession, the interest rates may plummet on home loans. Besides, the banks may be unwilling to offer extra credits to prospective buyers; they might sell the property as it is.
2. Difficulty applying for loans:
Securing financing for home purchase is yet another challenge. Buyers may come across tough approval requisites, higher credit score requirements, and even bigger down payments.
Summing it Up
While it may seem confusing whether to invest in real estate amid such uncertain times, the key is to not panic. Perhaps, a wiser decision would be to buy a property as a rental investment, only to sell it in the future when the economy stabilizes and prices recover. Also, you may want to weigh your options individually before deciding anything. If you have job security and are sure of enough finances in the future despite the current economic downturn, go ahead and invest in the housing market.
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