Is a Recession Good or Bad For Houston First Time Home buyers?
Although not a definitive definition, a recession is when an economy experiences two consecutive quarters of negative growth. Another way of putting it is, a persistent decline in economic activity. Has this happened? Yes.
However, the official determination as to whether or not we are in a recession is made by The National Bureau of Economic Research’s Business Cycle Dating Committee. No such decision has been made. Yet. Hence, we are not in a recession.
Now, while the economy does appear to be shrinking and inflation remains high, unemployment is still very low and consumer consumption is still, all things considered, holding steady.
How long does a recession usually last? well, the average U.S. recession since 1857 lasted 17 months, while the six recessions since 1980 have lasted less than 10 months on average.
How does a recession affect you if you plan on purchasing a home? Well, during a regular recession, in an attempt to stimulate the economy, the Federal Reserve usually lower interest rate which leads to more affordable mortgage rates, that bring home buyers into the market.
However, right now, because what we are dealing with is anything but “usual” instead of falling, the Federal Reserve continue to raise interest rates which intern leads to higher mortgage rates.
Why the increase in mortgage rate you asked? Because, although interest rates are not directly tied to mortgage rates, as one rises, so does the other.
When this happen, a lot of home buyers either get priced out or leave the market. The ones that remain in the market, often begin looking for a home they can afford, instead of one they really like.
On the plus side, right now what we are seeing is, as interest rates continue to rise, home prices are falling. Maybe not as low or as quickly as we would like, but they are falling.
During the pandemic, interest rates were low and home prices were high, now it seems we are heading in the opposite direction. So true are the words “The Only Constant Is Change”.
Thank you so much for stopping by. Until next time...Diana
Image by Diana
