Author Topic: Buying a home during a recession (Intro post)  (Read 1788 times)

Dali had a wicked stache

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Buying a home during a recession (Intro post)
« on: August 04, 2016, 03:59:45 PM »
>>Hi this is my first post since I started reading MMM back in 2014. This place is awesome!

So, I have heard/read from many places that we are on top of an epic housing (maybe everything) bubble once again. I would like to take a rain-check on debating whether the next recession is actually imminent and focus on the pitfalls of buying a house in a recession that is already underway.

I really want to buy my first home when the market bottoms out or gets closer to reality. That said, is it significantly harder to finance a home when the market is crashing out?

Can anyone reading this offer their experience trying to finance a home during and after the 2008 bubble burst? Was it utter chaos or was there still some rational path for the home buyer to tread at that time?

Bear in mind, I'm not treating this as an investment. I would like to settle for the long term. I plan to buy land and build a homestead. I have the design/build skills, just not much saved to buy a house outright.

I'll just stop right there and see what you all have to say. Thanks.

SwordGuy

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Re: Buying a home during a recession (Intro post)
« Reply #1 on: August 04, 2016, 04:15:09 PM »
If:

(a) the house appraises well compared to your purchase price,
(b) you have a good down payment,
(c) the PITI is 25% (or LESS) of your income,
(d) you have plenty of cash or stocks in reserve,
(e) all the cash or stock you need for this was put into the accounts 3 or more statements ago,
(f) you have a steady income,

then you should be able to get a mortgage.


Lmoot

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Re: Buying a home during a recession (Intro post)
« Reply #2 on: August 04, 2016, 05:46:34 PM »
I've only purchased one property, and that was in 2009, so I don't have anything but the recession to compare it to. I bought a bank-approved short-sale (meaning they approved the sale price...and I actually got it for $10k less PLUS got $8k deposited in my account after my tax return, for the FTHBTC). It took less than a month from my initial offer to keys in hand.

I can't imagine there would be too much of a difference between buying in a recession or a healthy market, other than price-wise. Even though I didn't have much of a credit history (I was 25 with 1 credit card and never had any loans of any kind). But did have 20% down and a minimum 6 months reserve after paying closing costs, so I was approved for the loan without any problem.

I did understand that some short-sales that weren't approved by a bank could take up to 6 months to finalize, and only after the agreed price went up enough to satisfy the bank. I can tell you I wouldn't have been able to afford my house before the recession and I could barely afford it today if I were to buy it today.

Real Estate is very localized, down to street/block level. There has been a bounce back in my area (central FL), but nowhere near bubble status. They say a recession happens approx. every 10 years (though probably not as big as the last one). We haven't reached the 10 year mark yet, but eventually there will be another dip....the question is, will the dip be big enough (or the growth rate low enough until then), to still be cheaper than current values?

You're best bet is to continue to save and research/ follow listings religiously to get an idea of the market, and to search for deals at ground level. Timing the market in real estate rarely works since you can be waiting for a decade or longer for any decent market-wide dip, and as already mentioned, that dip may not out-discount today's prices or interest rates.

In my case I looked and looked until I found a house that fit my budget and criteria. That's really all you can do. For something like a personal residence which you've already determined is not meant to be an investment, getting the best deal shouldn't be more important than finding a deal you can live with.
« Last Edit: August 04, 2016, 05:49:49 PM by Lmoot »

Drifterrider

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Re: Buying a home during a recession (Intro post)
« Reply #3 on: August 05, 2016, 05:02:48 AM »
>>

Can anyone reading this offer their experience trying to finance a home during and after the 2008 bubble burst? Was it utter chaos or was there still some rational path for the home buyer to tread at that time

I closed on my house 1 December 2008.  Banks were lining up to loan me money.  Have refinanced twice since then.  Initial PITI was $1,750 per month.  Now, $1,211 per month.

ShoulderThingThatGoesUp

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Re: Buying a home during a recession (Intro post)
« Reply #4 on: August 05, 2016, 05:58:22 AM »
Foreclosures can be good buys, but it's not automatic. Somebody who loses their house hasn't been keeping up on the maintenance.

Fishindude

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Re: Buying a home during a recession (Intro post)
« Reply #5 on: August 05, 2016, 06:18:33 AM »
As long as you can afford it, buy what you want when you want.

I bought an expensive lake home in 2008 when prices were about as low as I had seen them.   Thought this might be a real home run deal.
Although there has been some recovery, prices have only slightly increased since that time, so it really hasn't been much of a deal.   The positive side is that we enjoy and use the place a lot.

Trying to predict the low point of real estate and perfectly time a purchase is pretty tough.
Buy when you can afford to buy, and it won't matter much.

Kroaler

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Re: Buying a home during a recession (Intro post)
« Reply #6 on: August 05, 2016, 09:26:55 AM »
Foreclosures can be good buys, but it's not automatic. Somebody who loses their house hasn't been keeping up on the maintenance.

I went to look at a foreclosure headed to sheriff sale the other day.  I talked to the neighbor next door. He said the guy cut the grass, weeded the garden and vacuumed before he left. Much better than the traditional bitter people.

Why cant more people do that when they get foreclosed on? lol 

Ensign1999

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Re: Buying a home during a recession (Intro post)
« Reply #7 on: August 05, 2016, 12:15:35 PM »
I've purchased and refinanced quite a few houses post crash and like many previous posters have said: it isn't that difficult to get a loan so long as you are a person that should be given a loan (good income, credit, 20% down, etc).  I would be saving heavily now and honestly I would do a little house shopping now so you can narrow down what you are looking for and what the trends in your area of interest are.  That way, when you spot a house that matches what you are looking for, you know if it is a good buy or not, and you have the stash to act on it.  Also, I enjoy going to open houses to see what is out there to help keep my house current.

Dali had a wicked stache

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Re: Buying a home during a recession (Intro post)
« Reply #8 on: August 06, 2016, 11:33:16 PM »
The replies so far are pretty reassuring. I've been scouting relentlessly for a good two years now. I'm finally getting the budget under control and making a dent in our household debt. I think some time in the next 24 months we should be able to make our leap and quit renting.

I suppose I expected the actors & services that operate the housing market to 'freeze' once the economy reached a poor enough state. I guess the supply/side side has to keep moving product whether the incentives are favorable or not. Maybe breaking even proved a better outcome than insolvency/foreclosure, for those so fortunate.