Is Buying A Home a Smart Investment In Today’s Economy?
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For many people, property investment - or buying a home - is seen as a necessity. Everyone is told that it makes sense to own a home, rather than rent one. And, when the economy is on the up, there are rarely any arguments against this. However, what about when the economy is on the downturn, like right now?
Is buying a home a smart investment in today’s economy? The answer to this question is perhaps a bit more complex than one might think. There are many pros and cons, and it can depend on what type of house buyer you are.
Without further ado, let's take a look at some of the pros for buying a house during an economic downturn:
Property Investment Pro's
House Prices Are Cheaper
When the economy is in a downturn, this tends to mean house prices drop. It’s easier for a buyer to get better value for money during this period. Some experts claim that prices can drop between 30-50%, depending on the area. These are huge savings for someone to make. And, the flip side of this is that prices tend to go up over time. It’s unlikely that a recession will last for decades. Eventually, the economy will turn around, and the housing market will be booming again. This means that any investments made during the downturn will prove to be big earners. It’s a great idea to buy a house if you’re looking for a family home. Homebuyers like this will be looking to stay in their property for a long time. As a result, they can live happily and wait for the economy to turn around and boost the house price. After a decade or so, they might decide it’s time to leave and can sell their house for a big profit.
Interest Rates Are Lower
Interest rates tend to be lower during an economic downturn. What does this mean for homebuyers? It means that home loans tend to work out cheaper. With low-interest rates, it won’t cost as much to pay the loan back over time. For people that are in the early stages of buying a home, it makes sense to get a loan during this downturn. Secure a low fixed-interest rate and then spend the loan whenever you please. First-time buyers can get a much better deal when they buy when the economy isn’t good. It’s amazing how much someone can save by getting a home loan and buying a house in this economy.
It’s Smarter To Buy Than Rent
Buying a home in today’s economy is much smarter than renting one. Renting a home isn’t a good investment at all. There’s more tax to pay, and renters don’t own anything. This means that a landlord can decide to sell their property whenever they want. It’s a waste of money to pay rent during an economic downturn when house prices are so low. The smart move is to invest in a house, buy it cheap, and wait for the prices to rise again.
These three points make some good arguments for buying a home in today’s economy. However, it’s important to remember that there are two sides to every story. Before rushing into the housing market and investing in property, take a look at some of the cons below:
Property Investment Cons
Nothing Is Guaranteed
Although house prices are lower, and history suggests they rise over time, nothing is certain! It would be unwise to invest in a home based on the past. Just because house prices grew over time before, that doesn’t mean they will now. This is why it’s thought that families are in the best place to invest in a home now. If someone purchases a home to live in, then they can sit on the investment for as long as possible. It doesn’t matter if the value doesn’t increase within a couple of years, a family can wait it out for decades. For people trying to make quick money from flipping houses, there’s no guarantee of an increase in value. It’s possible, maybe even probable, but no one is 100% certain.
Job Market Is Unstable
When an economy is in a downturn, this has a huge bearing on the job market. Many companies can’t afford to keep their full quota of staff on. So, what happens? Businesses make cuts, and people are made redundant. It’s more likely that someone will lose their job in a recession than when the economy is good. Regarding buying a home, this has a big impact. Purchasing a home is a very big financial decision. It’s important that homebuyers have good job stability. Otherwise, they may be unable to keep up with mortgage repayments. Or, they struggle to pay bills and tax on their home. In a booming economy, most people can feel safe in their jobs. So, investing in a home is smart because there’s a steady income. In an economic downturn, the risk of being made redundant is higher. Thus, someone may buy a home, lose their job, and not have a regular income. Thanks to the unstable job market, buying a home can be a big risk.
May Have To Sell Your Current Home
For many homeowners, they have to sell their home before they invest in a new one. This is something that a lot of people forget about when they read all the pros of buying during a recession. If someone has a home and is still making mortgage payments, then it’s unwise to buy another one. It doesn’t matter how cheap the new home is, it means there will be dual mortgage payments. The only other option is to sell the current home and buy a new one. But, in a downturn, house prices are low, correct? So, there’s a chance of making a heavy loss on the home you sell. It’s being sold for much less than what it’s worth when the economy is stable.
As this post shows, the answer to the original question is complex. For investors, a property investment during a downturn can be a risky move, but it might pay off. First-time buyers have the most to gain from today’s economy. They can buy a family home for a low price, and have low-interest rates on their mortgage. Hopefully, this post has helped shed some light on the matter and lets people make the right decision.