How to Recession Proof your Home Search

There’s talk of a recession looming over our economy.  There isn’t a news source that isn’t talking about it.  The problem is for most people, the last recession left a bad taste in their mouth when it came to home prices.  However, before we discuss how to recession proof your home search, here are a few facts to keep in mind:

1. The Great Recession of 2008 was because of bad loans.  It just happened to correlate with the recession cycle.  Since the loose guidelines of lending are over (in other words, your dog can’t co-sign), it would take something massive to shake up the real estate industry to make a major difference in home prices.
2. When looking at a “typical” recession, home values didn’t change much.  Take a look at the stats, according to Keeping Current Matters:
   1. January 1980 to July 1980: Home values rose 4.5%
   2. July 1981 to November 1982: Home values rose 1.9%
   3. July 1990 to March 1991: Home values fell less than 1%
   4. March 2001 to November 2001: Home values rose 4.8%
3. Real Estate is still one of these best investments.  It ranked number two, just behind the Technology, Media, and Telecom sector in terms of the most billionaires (source).  It is because shelter is a necessity, it isn’t going away like the floppy disk or New Coke.

So, with that said, here are a few things you could do, just to make sure you aren’t put in a bad spot:

1. Don’t buy thinking you are going to sell in less than two years.  Think about how long you plan on owning the home.  Consider holding on to it a little longer.  This way should the market take a downturn, it doesn’t matter because you are waiting it out.  As a matter of fact, most of Los Angeles has exceed the height of 2008. 
2. Have back up strategies.  Because my wife and I own a home with the Accessory Dwelling Unit, we have the flexibility to rent out what we want, thus enabling us to hold on to the home longer without being house poor.  This could also mean consider buying a duplex or even a condo but get a roommate (the joys of house hacking).
3. Keep in mind your loan approval is based on your gross income, not net (after-tax withholdings).  Unless you are paying cash for a house or condo, you are most likely getting a mortgage.  With that said, don’t overextend yourself on the payments just to make it work.  Stay within your means.

These tips might sound basic, but they can really make a difference in keeping you comfortable with buying.  No one can say for certain what will happen next but being prepared is never a bad thing.