Is a Good Idea to Buy a House During A Recession?

Should I Buy a House in a Recession in Canada

The idea of buying a house during an economic recession may seem scary. After all, recessions mean job losses, falling home prices, and tighter lending standards. But surprisingly, a recession can actually be one of the best times to buy real estate. Here’s a comprehensive look at the pros and cons of buying a home during a downturn.

What is a Recession?

First, let’s define what a recession actually is.

Key Characteristics of a Recession

  • A significant decline in economic activity that lasts for months or even years
  • Falling GDP, incomes, retail sales, and industrial production
  • Rising unemployment
  • Increased loan defaults and bankruptcies

The Bank of Canada or the minister of finance determines whether the economy has entered and exited a recession by preparing the country’s economic reports using data collected by Statistics Canada. The Federal Balanced Budget Act, which has defined the terms of a recession and provided some limits on the extent to which the federal government can respond by increasing its operating budgets since 2015, governs this determination.

How Recessions Impact the Housing Market

Recessions invariably affect real estate markets. Here are some of the most common effects:

During the Great Recession from 2007-2009, existing home sales plunged from 7.1 million in 2005 to 4.1 million in 2010. The median home price also dropped 25%, from $221,900 in 2006 to $166,100 in 2011.

Will Home Prices Collapse Again?

Many worry that home values could plummet just like they did during the housing crisis. However, most experts believe a 2008-style crash is unlikely.

That’s because:

  • Lending standards are much tighter today
  • There are far fewer risky mortgage products
  • The share of adjustable-rate mortgages is very low compared to the pre-crisis period

While prices are unlikely to collapse nationwide, localized downturns in the hardest hit markets are certainly possible in a severe recession.

Advantages of Buying a Home During a Recession

Now let’s look at some of the biggest advantages of buying real estate during an economic slump:

1. Pros Of Buying During Recession: Lower Home Prices

The law of supply and demand kicks in during recessions. With fewer qualified buyers in the market, bidding wars become less common and sellers have less leverage to demand top dollar.

The result is discounted home prices. While prices dropped 25% nationally in the Great Recession, deals can be found in any downturn.

2. Lower Mortgage Rates

To stimulate the economy, the Federal Reserve typically cuts interest rates during recessions. This makes it cheaper for banks to borrow money, leading to lower mortgage rates for homebuyers.

Lower rates reduce the cost of homeownership over time. And when combined with already low prices, mortgage rates create huge savings.

3. Negotiating Power: Get The Best Deal

When demand drops, buyers gain negotiating leverage. Sellers, eager to offload properties in a slow market, are more likely to accept below-asking offers and cover closing costs.

With less competition, buyers can negotiate the best possible price while still getting their dream home.

Cons of Buying in a Recession

Of course, recessions also come with some downsides for prospective home buyers:

1. Job Security Risks

Unemployment naturally rises in recessions as businesses cut back. Even workers in traditionally stable fields can face layoffs when money gets tight.

Without a steady income, it’s tough to get a mortgage approved or continue making payments. That makes job security critical for recession buyers.

2. Tighter Lending Standards

To reduce defaults during downturns, lenders tighten their standards. Large down payments and excellent credit become requirements for approval.

First-time buyers and those with less-than-perfect credit tend to struggle most with the restricted lending environment.

3. Foreclosure Risks

Spikes in foreclosures and short sales often dump additional distressed inventory on the market. While presenting opportunity, poorly-maintained foreclosures can turn into money pits.

Careful inspection and educated buying is a must when considering corner-cutting former owners or flippers.

Key Considerations Before Buying in a Recession

Beyond broad pros and cons, you need to weigh your personal financial situation when deciding whether to buy in a downturn:

  • Do you have strong job security? Recession-proof jobs in healthcare, education, and other fields are ideal.
  • Is your credit score over 740? Excellent credit helps secure approval.
  • Do you have a large down payment saved? 20% down or more will get the best rates.
  • Can you withstand months of unemployment? Having an emergency fund is critical.
  • Are you planning to stay put for several years? Buying for the long-term minimizes risk.

If you can answer yes to these questions, a recession could be the perfect time to get a great deal on your dream home.

Historical Data on Home Buying in Recessions

Looking at past recessions provides helpful context on the relationship between the economy and housing market.

Here’s a quick overview of how home sales, prices, and mortgage rates have performed during the last four recessions:

Recession Period Existing Home Sales Median Home Price 30-Year Fixed Mortgage Rate
July 1990 – March 1991 -7% -1.4% -2.3%
March 2001 – November 2001 -6.1% +2.9% -1.8%
December 2007 – June 2009 -23% -11.3% -1.8%
February 2020 – April 2020 -17.8% +7.9% -1.7%

*Home sales and prices compared to 12 months prior. Mortgage rates compared to recession start.

While each recession has unique characteristics, the data indicates home prices tend to drop during downturns, while lower interest rates help maintain housing affordability.

Should You Buy a Home in the Next Recession?

While recessions can create once-in-a-lifetime buying opportunities, they also contain risks. Ultimately, you need to weigh your personal financial factors, rather than trying to time markets perfectly. But with the right prep work and careful buying, a recession purchase can lead to huge savings on your dream home.

FAQs:

Q: Is it a good time to buy a house during a recession?

A: Buying a house during a recession can have its advantages. With the housing market experiencing a downturn, you may be able to get a better deal on a property compared to when the market is thriving.

Q: What are the cons of buying a house during a recession?

A: While there are potential benefits, there are also some downsides to consider. During a recession, there may be economic uncertainty, which could affect the housing market. Additionally, if you need to sell your current home, you may face challenges due to fewer buyers in the market.

Q: How do house prices typically go down in a recession?

A: During a recession, the demand for houses often decreases, leading to a decrease in prices. Sellers may need to lower their listing prices to attract buyers, creating an opportunity for buyers to purchase a property at a lower price.

Q: Are there any benefits of buying a home during a recession?

A: Yes, there can be advantages to buying a home during a recession. In addition to potentially paying less for your home, you may also have a wider selection of properties to choose from, as fewer buyers may be in the market.

Q: How does a recession affect your home purchase?

A: In a recession, lenders may be less likely to approve mortgages, making it more challenging to secure financing for your home purchase. However, if you have stable finances and a good credit score, you may still be able to obtain a mortgage.

Q: Was the 2008 recession a good time to buy a house?

A: The 2008 recession, also known as the Great Recession, had a significant impact on the housing market. While some buyers were able to take advantage of lower home prices, others faced financial difficulties and lost their homes. It’s important to carefully evaluate your financial situation and the specific market conditions before making a decision.

Q: Is buying a house during a recession similar to buying during a traditional recession?

A: The process of buying a property during a recession can be similar to buying during a traditional recession. However, the impact on the housing market and the overall economy can vary. It’s essential to stay informed about current market conditions and seek advice from real estate professionals.

Q: Is it a good time to purchase a property in 2023?

A: The housing market can be influenced by various factors, and it can be challenging to predict future market conditions. It’s advisable to monitor the market and consult with experts for guidance based on specific economic indicators and trends.

Q: How do prices and interest rates play a role in buying a house during a recession?

A: In a recession, there is a possibility of lower home prices as sellers may need to reduce their listing prices to attract buyers. Additionally, interest rates may be lower, which can make financing more affordable for buyers.

Q: How does owning a home during a recession compare to renting?

A: Owning a home during a recession can provide a sense of stability and equity, as property values generally appreciate over time. On the other hand, renting can offer more flexibility, especially if the housing market is uncertain. It’s important to consider your long-term goals and financial situation before deciding to buy or rent.

Conclusion

  • Recessions allow buyers to negotiate lower prices and rates
  • However, job security and lending risks exist
  • For prepared buyers, recessions enable big savings
  • Financial stability is vital when buying in downturns
  • Long-term gains outweigh short-term pain for most

Did you know that according to a survey by Richard Morrison, 77% of homebuyers who purchased in the 2009 recession still live in their homes today with significant equity gains? With proper planning, buying a home in a downturn can pay off for decades to come.


Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.

Lets Have a Smart Conversation.

Let's Chat! Looking for a REALTOR© who can exceed your expectations? Look no further than Richard Morrison! His mission is to serve without limit & provide solutions that cater to your core needs.
* 20+ Years of Experience
* Medallion Member
* RE/MAX Hall of Fame

Your Privacy is important to us. View our Privacy & Data Collection Policy.

Latest Vancouver Listings

Active
$2,698,800
2 432 E 1ST ST, North Vancouver Real Estate for sale, MLS® R2835487

Beds: 5Baths: 5Built in 20242698 sqft

1 hour ago

Beds: 5Baths: 5Built in 20242698 sqft

Experience luxury in this 5-bed, 5-bath, 2700 sqft home—a blend of...

$2,698,800

MLS®: R2835487 Oakwyn Realty Ltd.

1 hour ago

Active
$908,000
1208 933 HORNBY ST, Vancouver Condo for sale, MLS® R2835460

Beds: 2Baths: 2Built in 2005856 sqft

2 hours ago

Beds: 2Baths: 2Built in 2005856 sqft

"Electric Avenue" quality built by Bosa. Bright and spacious 2 bedrooms...

$908,000

MLS®: R2835460 Angell, Hasman & Associ...

2 hours ago

Active
$768,000
2602 1289 HORNBY ST, Vancouver Condo for sale, MLS® R2835438

Bed: 1Bath: 1Built in 2022461 sqft

2 hours ago

Bed: 1Bath: 1Built in 2022461 sqft

Welcome to One Burrard Place- a 60 storey tower completed in 2022, located...

$768,000

MLS®: R2835438 Royal LePage Little Oak Rea...

2 hours ago

Active
$620,000
406 1496 CHARLOTTE ROAD BC, North Vancouver, R2835435

Bed: 1Bath: 1Built in 2021570 sqft

2 hours ago

Bed: 1Bath: 1Built in 2021570 sqft

Welcome to Brooklynn, a boutique development of 63 homes that pair...

$620,000

MLS®: R2835435 Magsen Realty Inc.

2 hours ago

Active
$2,400,000
660 DUCHESS AVE, West Vancouver Houses for sale, MLS® R2835470

Beds: 2Built in 19452352 sqft

3 hours ago

Beds: 2Built in 19452352 sqft

investor attention priced close to assessment price, basement is ground...

$2,400,000

MLS®: R2835470 Royal Pacific Lions Gate Re...

3 hours ago

Active
$2,820,000
1595 W 66TH AVENUE BC, Vancouver, R2835462

Beds: 3Baths: 2Built in 19451130 sqft

3 hours ago

Beds: 3Baths: 2Built in 19451130 sqft

Charming, well maintained, bungalow on a 50'x121.98' NW corner lot at 66th...

$2,820,000

MLS®: R2835462 LeHomes Realty Premier

3 hours ago

Active
$1,950,000
2136 FRANKLIN ST, Vancouver Homes for sale, MLS® R2835443

Beds: 4Baths: 3Built in 19132292 sqft

3 hours ago

Beds: 4Baths: 3Built in 19132292 sqft

Charming circa 1913 Heritage B, this 2292 sq.ft home has 3 suites, comes...

$1,950,000

MLS®: R2835443 RE/MAX Select Realty

3 hours ago

Active
$798,800
253 1100 E 29TH STREET BC, North Vancouver, R2835478

Beds: 2Bath: 1Built in 2002828 sqft

4 hours ago

Beds: 2Bath: 1Built in 2002828 sqft

Popular Highgate community! 2 spacious bedrooms plus den/office highly...

$798,800

MLS®: R2835478 Luxmore Realty

4 hours ago

Active
$1,344,900
503 2235 E BROADWAY BC, Vancouver, R2835447

Beds: 3Baths: 2Built in 20231052 sqft

4 hours ago

Beds: 3Baths: 2Built in 20231052 sqft

Discover refined urban living in Popolo, Grandview-Woodland’s new emblem...

$1,344,900

MLS®: R2835447 Sutton Group-West Coast Rea...

4 hours ago

Active
$6,299,000
2175 W 32ND AVENUE BC, Vancouver, R2835437

Beds: 5Baths: 6Built in 20154486 sqft

4 hours ago

Beds: 5Baths: 6Built in 20154486 sqft

Nestled in Quilchena, this stunning home offers panoramic vistas. Three...

$6,299,000

MLS®: R2835437 Sutton Group - 1st West Rea...

4 hours ago

Active
$1,828,000
1582 ROSS RD, North Vancouver Home for sale, MLS® R2835423

Beds: 4Baths: 3Built in 19562282 sqft

4 hours ago

Beds: 4Baths: 3Built in 19562282 sqft

Beautifully updated home with a 2 bed suite, just a few steps from Lynn...

$1,828,000

MLS®: R2835423 Stilhavn Real Estate Servic...

4 hours ago

Active
$2,188,000
3492 E 4TH AVE, Vancouver Houses for sale, MLS® R2835416

Beds: 4Baths: 4Built in 20062201 sqft

4 hours ago

Beds: 4Baths: 4Built in 20062201 sqft

Nice and Quiet central location in Renfrew Area. Very well kept home with...

$2,188,000

MLS®: R2835416 Selmak Realty Limited

4 hours ago

Active
$729,000
1703 5189 GASTON ST, Vancouver Apartment for sale, MLS® R2835409

Beds: 2Baths: 2Built in 1996759 sqft

5 hours ago

Beds: 2Baths: 2Built in 1996759 sqft

***OPEN HOUSE DECEMBER 2ND/3RD, 2-4PM*** SE corner 2 bdrm & 2 bath...

$729,000

MLS®: R2835409 Zolo Realty

5 hours ago

Active
$1,699,000
1579 RUPERT ST, Vancouver Homes for sale, MLS® R2835407

Beds: 4Baths: 4Built in 20231748 sqft

6 hours ago

Beds: 4Baths: 4Built in 20231748 sqft

Brand new back duplex w/stunning curb appeal sitting across lush greens of...

$1,699,000

MLS®: R2835407 Sutton Group-West Coast Rea...

6 hours ago

Active
$1,899,000
1483 TILNEY MEWS BC, Vancouver, R2835400

Beds: 4Baths: 4Built in 20121977 sqft

6 hours ago

Beds: 4Baths: 4Built in 20121977 sqft

Fantastic unit at Granville Mews in South Granville area. Home is barely...

$1,899,000

MLS®: R2835400 Sutton Group-West Coast Rea...

6 hours ago

Active
$1,498,000
380 E WOODSTOCK AVENUE BC, Vancouver, R2835396

Beds: 3Baths: 4Built in 20231452 sqft

6 hours ago

Beds: 3Baths: 4Built in 20231452 sqft

$1,498,000

MLS®: R2835396 Sutton Group-West Coast Rea...

6 hours ago

Active
$1,488,000
381 E 41ST AVE, Vancouver Real Estate for sale, MLS® R2835388

Beds: 3Baths: 4Built in 20231452 sqft

7 hours ago

Beds: 3Baths: 4Built in 20231452 sqft

$1,488,000

MLS®: R2835388 Sutton Group-West Coast Rea...

7 hours ago

Active
$259,000
1106 1251 CARDERO ST, Vancouver Condos for sale, MLS® R2835385

Bed: 1Bath: 1Built in 1968436 sqft

7 hours ago

Bed: 1Bath: 1Built in 1968436 sqft

Lowest price in the West End. Estate Sale. Affordable studio with separate...

$259,000

MLS®: R2835385 Maude, MacKay & Company...

7 hours ago

Active
$969,000
1403 1060 ALBERNI ST, Vancouver Condo for sale, MLS® R2835367

Beds: 2Baths: 2Built in 1988986 sqft

8 hours ago

Beds: 2Baths: 2Built in 1988986 sqft

Welcome to The Carlyle! In the heart of downtown Vancouver, just steps to...

$969,000

MLS®: R2835367 Oakwyn Realty Ltd.

8 hours ago

Active
$2,490,000
1420 PARK DRIVE BC, Vancouver, R2835392

Beds: 7Baths: 4Built in 19742299 sqft

8 hours ago

Beds: 7Baths: 4Built in 19742299 sqft

Bringing urban chic to your neighbourhood. This home has been upgraded...

$2,490,000

MLS®: R2835392 Macdonald Realty Westmar

8 hours ago

Start your search with Richard Morrison, Top Award Winning Vancouver Realtor:

Contact Richard Morrison Top Vancouver Realtor today to find a Vancouver real estate and Vancouver condos for sale. This includes eastside residences and eastside apartment for sale. Also check out West Vancouver homes for sale or maybe an West Vancouver condos for sale. If you prefer North Shore, take a look at our listings in North Vancouver homes for sale and North Vancouver condos for sale.

Vancouver East Houses

Collingwood
Downtown East
Fraser
Fraserview
Grandview
Hastings
Hastings Sunrise
Killarney
Knight
Main
Mt Pleasant
Renfrew Heights
Renfrew
South Van
Victoria

Vancouver West Houses

Arbutus
Cambie
Dunbar
Kerrisdale
Kitsilano
McKenzie Heights
Marpole
Oakridge
Point Grey
Quilchena
SW Marine
Shaughnessy
South Cambie
South Granville
University
West End

Vancouver East Apartments

Champlain Heights
Collingwood
East Downtown
Fraser
Grandview Woodland
Hastings
Hastings Sunrise
Killarney
Knight Condos
Main
Mount Pleasant VE
Renfrew Heights
Renfrew
South Marine
South Van
Strathcona
Victoria VE

Vancouver West Condos

Arbutus
Cambie
Coal Harbour
Downtown VW
Dunbar
Fairview
False Creek
Kerrisdale
Kitsilano
Marpole
Mount Pleasant VW
Oakridge
Point Grey
Quilchena
S.W. Marine
Shaughnessy
South Cambie
South Granville
Southlands
University
West End VW
Yaletown
img

Richard Morrison

My name is Richard Morrison and I aim to empower people to buy and sell real estate in the most effective way possible. I can service all of your Metro Vancouver real estate needs & beyond. I specialize in Vancouver, North Vancouver, West Vancouver, Vancouver West, Richmond, Burnaby and other areas in the Lower Mainland BC Canada. You can be assured that whether buying or selling your home, I will get the job done. I offer a full compliment of real estate services with 15+ years of experience. About Richard Morrison

Related posts

Annual Events in Vancouver

I have lived in Vancouver for over 30 years and I have experienced many of these events myself....

Continue reading
by Richard Morrison

Is AirBnB Allowed in Vancouver?

When it comes to deciding whether Airbnb is allowed in Vancouver BC, the answer depends...

Continue reading
by Richard Morrison

Pros and Cons of Owning a Condo in BC? Buying a Condominium

Are you considering buying a condo in BC Canada? It's an attractive option for many people due...

Continue reading
by Richard Morrison