Is It Smart To Wait For A Recession?
I've had friends and family ask me if they should wait to buy a home once a recession hits. My answer to them is has anyone actually made an accurate prediction of a recession? You may wait years before one ever happens and at that point it would most likely have been smarter to buy your home before the years you waited to get a "deal" because home prices have historically rose.
Tennessee real estate has increased ~6-8%/year for the past 5 years, according to the Federal Housing Finance Agency. So if you wait two years you're going to miss out on a potential ~$12,360 to $16,640 for every $100k you spend if Tennessee keeps it up.
Do Recessions Actually Lower Home Values?
Most recessions haven’t lowered the value of homes but increased property value. You should always look at the cause of the recession because the reason for the recession is usually what is actually get affected.
According to The Balance, the biggest reason for the 2001 recession was the “dot.com bubble” bust and while that affected the stock market & investors it positively impacted the housing market.
ATTOM Data Solutions, one of the leaders in real estate data, looked at home prices during the past five recessions since 1980 and found only 2 out of 5 recessions actually caused home prices to fall. The recession in 1990 caused only a 0.9% drop while the 2008 housing crisis lowered the housing market by 13.9%.
Source: ATTOM Data Solutions and Curbed
What About The 2008 Housing Crisis?
What Was The 2008 Housing Crisis?
The housing crash of 2008 caused tons of homes to be put on the market with a small amount of actual buyers. With more supply and less demand of homes it caused a strong buyer's market. The Great Recession lasted for 18 months (December 2007 - June 2009) and that allowed plenty of people to bank on the "cheap homes" so I totally understand why you would want to "wait until a recession" to buy your home. It was one of the few recessions that had a huge affect on the housing market.
The big reason that the 2008 recession had such a huge impact on the housing market was the mortgage industry had less regulations than today's mortgage industry. Loans were given to people who couldn't actually afford their house. When the financial sector had its dip everyone who couldn't truly afford their homes were impacted.
In my professional opinion, I don't see the same thing happening with all the federal regulations in today's mortgage sector.
What If I Bought Before 2008?
If you bought at the high right before the crash in 2008, and still own your home today, you might have made a profit where most people lost because they "Bought High and Sold Low."
You can see on the chart below the national overall housing market the past 19 years.
Source: NeighborhoodScout
For Tennessee, there has been amazing growth in property values. Tennessee home values have seen a 67.7% increase from July 2007 - September 2019.
Investing in Real Estate is just like investing in the Stock Market; the longer you hold your assets the more money you tend to make.
In the investing world, you would have made a profit of 7.8%/year investing in the S&P 500 in August 2007 before the crash and held through to today, according to CNBC
Conclusion
In my professional opinion, I don't think it is a smart idea to wait on buying a home just because you are waiting for a recession.
As the saying goes, "The best time to plant a tree was 20 years ago. The second best time is now."
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