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I am currently renting, but am considering buying a house in the future (1-3 years). I want to know if I should even consider waiting for a future recession to buy a home at a better price. Some would argue that we are due for a recession (seems common enough to not need a reference), though none of us can know this is imminent with certainty.

I would not mind waiting to buy if it means my money would go further. However, if I wait and the market does not come down, I risk the inverse as the cost of homes in my area is rising faster than inflation.

All other considerations aside, should I wait for a recession to buy a home and what other risks does this carry?

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    I'm in the same boat as you but you'll never be able to time the market correctly. Just buy when it makes financial sense. – Jack Dec 23 '19 at 23:12
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    @Jack: Being able to time the market perfectly is not the same as being able to time it approximately, which is a part of making financial sense. E.g. if you have your downpayment money in stocks, and you think the market is over-valued, it might make sense to sell the stocks and buy a house with the money. But of course there are a lot of other factors affecting the rent/buy decision. – jamesqf Dec 24 '19 at 4:38
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    Firstly, there doesn't have to be a recession for house prices to drop. In fact, you don't really want to buy in a recession especially if you are at the potential risk of losing your job. The best time to buy a property is when interest rates are near or at their highest in the cycle. – Victor Dec 24 '19 at 6:19
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    This is a really bad idea for a number of reasons, but particularly this: when house prices drop, people try to avoid selling. During the 2007 financial crisis, in my country, the housing market mostly dried up. Mortgages were very hard or even impossible to get from any bank, and people with good houses tried to wait it out and not sell. Prices may have been low but availability was very poor. Getting a good house during a recession is much harder than it is outside of a recession. Buy now. – niemiro Dec 24 '19 at 11:39
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    @QuoraFeans Yes, I would be taking out a mortgage and have enough for a DP. – Snowman8734 Dec 26 '19 at 14:20

11 Answers 11

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You don't know if/when prices will come down and if they do come down you don't know if they'll go back up or keep sliding.

Renting makes a lot of sense in some markets, like San Francisco, New York City, Kansas City, etc. If you're in a market where the price to rent ratio is quite high then you're not really missing out on much by not buying now, if you're in one of those markets waiting makes more sense.

I would probably just focus on the rent vs buy decision based on the current market and how long you plan to live there. You're not likely to get the timing right if you try to wait for the perfect time to buy. There are a number of "Rent vs Buy calculators" out there to play with, here's a simple one from NerdWallet.

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    Geographic data and the rent/buy price ratio is critical to answer any 'should I buy or rent' question; +1. – Grade 'Eh' Bacon Dec 23 '19 at 21:58
  • The rent market in San Fran isn't great either. A friend of mine is leaving the state despite having rent ~50% below market (eg. $2000/mo. compared to an identical unit across the street being $3500/mo.) Partly because the area is so expensive, but also a relatively weak job market (despite a college degree he's been unable to find a decent job in 2 years) and a growing homeless problem. The only reason to rent and not buy is because literally nothing is for sale (tax reasons). – Draco18s no longer trusts SE Dec 24 '19 at 20:17
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Based on historical data (although it depends on where you live) past recessions didn't have much impact on housing prices except the great recession.

Since 1980, there have been five official recessions in the United States. In all but the 2007-2009 Great Recession, inflation-adjusted home prices only declined an average of 2.7 percent from the month before the recession began to the final month of the recession, according to the home price index data from Robert Shiller.

Considering you are currently renting you can save 1-3 years of rent if you buy a place instead.

During a recession you might see more properties foreclosed (which might be an opportunity to find good deals) or the interest rate might be lower, but in my opinion the sooner you become a homeowner the better you manage your financials.

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    Thanks for the answer! Do you have a source for the first statement (past recesssions...)? The few charts (median sale prices of homes) did show some decrease in price during recessions. Though I don't think the median sale prices of homes shows the value of individual homes accurately – Snowman8734 Dec 23 '19 at 21:30
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    @user27432: If I understand "median sale price" correctly, it only tells you about relative volume in low-priced vs high-priced homes, and nothing at all about changes in home value. – Ben Voigt Dec 23 '19 at 21:45
  • @BenVoigt I agree. Masih's (now) linked article uses a much better method of showing the changes in home value. I asked for the reference because I didn't think median sale price was a good metric. – Snowman8734 Dec 23 '19 at 21:52
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    Also remember that the reason the great recession had such a significant impact was likely that it was caused by housing market instability. One caveat I'd say, though, is that often housing payments dropped more than the price drop due to the Fed reducing interest rates in part attempting to prop up the housing market and other similar markets that are heavily dependent on lending. – Joe Dec 23 '19 at 22:02
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    "you can save 1-3 years of rent if you buy a place [now] instead [of in 1-3 years]" -- home ownership is not free. You incur the cost of capital, maintenance, taxes, and insurance to own the home for that time. This is like the incorrect idea that renting is "throwing money away". – nanoman Dec 26 '19 at 21:32
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There's no way to know the answer to that.

The first issue is that there's no way to know when the next recession will occur. You could be waiting for a long time and even if it occurred, it could be a shallow one.

Home prices tend to grow modestly during recessions. The big exception to this was the 2008 GFC when there was a housing bubble along with the sub prime mortgage catastrophe. So will the next recession be the former or the latter?

Your geographical location is also a consideration. I can't cite the source offhand but I recall tooling around a web site that provided stats on how home prices performed during recessions in major US cities (Zillow?). That's another factor that has to be taken into your considerations.

I'd suggest that you try to determine if it's cost effective for you to own (compared to renting). If it is, consider looking at properties with motivated sellers (death, divorce, fixer uppers, etc.).

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Probably not.

The average time between recessions is allegedly four years, which means that the average time you will need to wait for a recession is four years (note that this is unintuitive: you'd expect your average wait to be 2 years, or perhaps 4 years minus the time since the last recession, but you'd be wrong: this is known as the waiting time paradox, or the bus wait paradox: https://en.wikipedia.org/wiki/Residual_time).

So the cost of waiting will average out to:

(4 years' rent) + (4 years of house price increases) - (amount house prices drop during the 4-yearly recessions).

There's a problem, there. House prices don't really drop during a common recession. Here's the graph of house prices for the last 40 years or so:

enter image description here

[via: https://www.forbes.com/sites/adammillsap/2019/01/07/regulations-make-floridas-housing-more-expensive/#2fb229a93f5d]

Notice anything? No big dips during recessions. There's a big bubble that grew and burst, but there are no big dips every four years or whatever. House prices continue to grow during a recession, if they're already growing.

So looking at the darker line (All US) on that graph, and assuming $1k/month rent:

  • 4 years' rent: $48k
  • 4 years of house price increases: $16k
  • amount house prices drop every 4 years: $0

So, if you wait four years, odds are good you'll be $54k in the hole with absolutely nothing to show for it.

And notice that, even when house prices were plummeting as the housing bubble burst, they only dropped from a bit less than 380 to a bit over 300, a drop of less than 80k in five years. If you'd had a crystal ball to tell you to start this plan at the top of the peak, and wait five years until it told you the exact right moment where it bottomed out, you'd have saved yourself $80k on a house, and cost yourself $60k in rent, for a grand total saving of less than $20k.

If you got your start point even just one year early, you'd have made a loss.

The math might change for you a little if you're paying negligible rent, but in general, there's a very small stretch of time where this approach is worth it: the year leading up to a big housing bubble bursting.

Every other point on the graph, it's better to buy the house as early as you can, while it's still relatively cheap compared to its future value.

Now, there are no crystal balls. The day after you get your mortgage, everything could go bad and you could be left with an unsellable house, no job, and a massive mortgage. That's the risk you take on, getting a mortgage.

The current slope of the graph is a little steep, but if we're in a bubble at the moment, it's not a big one: any adjustment is likely to be relatively small.

So I'd argue: buy while you can.

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    As in my comment on Masih's answer: You're omitting the homeowner's cost of capital, maintenance, taxes, and insurance from the comparison. – nanoman Dec 26 '19 at 21:45
  • @nanoman Good points! Feel free to redo the math to include any additional arbitrary costs you feel matter: I predict they won't change the balance sheet in any significant way: the earlier you buy, the less you pay. – Dewi Morgan Dec 27 '19 at 18:46
  • To be fair, bus wait times are to an extent deterministic while recessions are not. Heck, we can't even get consensus on when a recession began, peaked, or ended after the fact. – iheanyi Dec 31 '19 at 23:08
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If you are a real estate investor then the canonical answer is "maybe". However, a real estate investor wouldn't be asking such a question to a bunch of Internet strangers. Additionally, you would already have a sense of when, where, and how much.

If you are an average person looking for a place to live then buy when it is within your means. A person with 1 million dollars and no house should probably get a house but someone whose total savings amount to a 10% down payment should probably wait a few more years.

However, if you're planning to move in the next 3-5 years then buying might not be the best choice.

If you can afford the house now then why would you be unable to afford it during a recession? Do you plan to lose your job? If you don't have a house and lose your job during the recession then buying a house becomes even trickier since lenders expect a stable income history.

A house is like a sane, non-bitcoin and non market-timing, investment. You should hold on to it for at least 10 years before wanting to sell it.

If you wait 1-3 years and a recession hasn't happened then what?

See:

https://www.google.com/search?q=site%3Amoney.stackexchange.com%2F+right+time+to+buy+a+house&oq=site%3Amoney.stackexchange.com%2F+right+time+to+buy+a+house

Particularly:

When is the right time to buy a car and/or a house?

and

Should I buy a house now before prices rise even more?

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If you are waiting for a drop in house price, then others have given answers and I totally agree with them.

However, there is a flip side. If you are unsure of your job security during a recession, then it's a perfectly sound decision to wait until you feel safer. As buying a house means long term commitment and you need steady income to support your mortgage.

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should I wait for a recession to buy a home and what other risks does this carry?

Short answer: Get a good assessment of your ability to pay for the next years and less on timing the home market.


Since OP says little about income/assets, I am concerned about not clearly assessing that first.

For a first time buyer a critical aspect of home ownership is dealing with the first few years and it is your financial ability to cope with ups and downs - this often heavily depends on your income/assets.

Rather than concern about the best time to buy based on home prices, assess how recession resistant are your assets/income.

If owning a home enables you to advance your ability to earn an income/advance your career with reasonable continued job employment prospects - go for it. Recall housing pricing are strongly reflective of the local wages.

If your are stretching your ability to buy your first purchase without job security (or asset buffer) - think carefully before buying - regardless of recession potential.

if I should even consider waiting for a future recession to buy a home at a better price.

You have more control of your income now than market conditions - you can readily move. Optimize your income/assets first before optimizing the home purchase timing.

If I felt a recession was likely soon, I'd worry more about my income/assets than purchase price.

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I am currently renting, but am considering buying a house in the future (1-3 years).

1-3 years is nothing. There's a saying that the market will remain irrational longer than you can remain solvent. If you expect a recession will cause house prices to drop in a major manner within the next 1-3 years, dream on!

A similar hopeful dreaming can happen in the stock markets as well. The one who thinks stocks are too expensive will never invest into the market, retaining all money in bonds. Such a bond portfolio will be guaranteed to underperform when compared to a stock portfolio.

All other considerations aside, should I wait for a recession to buy a home and what other risks does this carry?

Don't invest money you can't afford to lose. This includes purchasing a home as well.

If you have let's say 50 000 USD, and you want to have them 1 year from now as well, keep them in safe instruments. A house is not a safe instrument. In most places, 50 000 USD is not enough to buy even a small home.

If recession happens, with house prices falling 50%, and you still have the 50 000 USD, and you feel your job is secure, then you might have a very good opportunity to purchasing a home. But you should consider other possibilities for the money as well. You might have a very good opportunity to invest into stocks, too. So don't always think a house is the best thing you can do with your money if you can afford it. There are always alternative options, too.

House prices can fall as much as 80%. It has happened in the past in Amsterdam, see this paper for details.

If you can't afford your house value to fall 80%, don't buy a house, now or later. Instead, rent!

If houses become less expensive, so much less that you can afford your house value to fall 80%, then is the time to buy a house.

I bought a car for 17000 EUR a long time ago. Less time ago, I sold it for 6300 EUR. Its value fell 63%. That's not a problem for me as I needed the car and the money I put into it was money I could afford to lose.

Now, I'm not saying the value of a house purchased right now will necessarily fall 80%. I'm just saying it can happen. You should be prepared for any occurrence of events that is possible.

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what other risks does this carry?

  • You don't know when the next recession recession will happen.
  • Until then, you're both paying rent and saving up for a deposit.
  • Prices from now until the recession might have increased more than the price dropped during the recession.

This random internet stranger's suggestion is to buy a reasonably priced house (2-3x family income) as soon as you have a good DP.

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There are already more vacant houses than potential buyers in many markets, and this hasn't had much of an influence on price, so it is safe to assume that people holding on to them do not need the money urgently.

A recession would generally not force these people to sell, instead it causes mortgages to go under, which transfers ownership of houses to banks who do not have a strong incentive to sell at a lower price either.

The only cheap houses that appear on the market during a recession are those that had a clear title before, and the owner wasn't able to convince a bank to finance against the house as collateral.

A recession is also rather unpredictable, because it often causes deterioration of infrastructure, which also wildly affects house value.

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    I would think that banks actually have a strong incentive to sell houses they've forclosed on, since otherwise they have to pay to maintain the vacant house - and being vacant, the house could easily be subject to vandalism & squatting. – jamesqf Dec 25 '19 at 4:31
  • @jamesqf Depends on house vs. land value. If the value is mostly in the land, upkeep of the house matters less, since buyers might just be planning to demolish and rebuild anyway. – Geoffrey Brent Dec 25 '19 at 23:44
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Taking a different angle for this answer. I've had extended conversation on rent vs. buy in the comments on other posts not long ago. I'm very strongly pro-buy because for the equivalent or better in a residence you own you can save a lot of money that you'd be wasting on rent.

Rent is expensive (constantly throwing away money), and it will go up. If you get a mortgage, that monthly payment is fixed, so you're safe from inflation there. (You also get equity, and could take out a loan on it if needed, e.g. if under some financial stress.) To me that's an excellent security (and diversity) investment, and this weighs heavily on my own decision making.

If you wait to buy, you risk:

  • Not being able to buy a home in a recession, as others have mentioned.
  • Being forced to pay whatever the price of rent is, because you can't/don't own a residence.
  • Not having the savings of owning a home vs. renting, for as long as you don't own.

Seems like a no-brainer to me.

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  • Also, consider that even if there isn't a recession or crash, there has also been a lot of talk of a slowing in growth/stagnation. – Andrew Dec 26 '19 at 19:22

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