Navigating a Changing Market and Recession
This new market is likely less frightening for those who have lived (and worked) through recessions — veteran Realtors®, you know who you are.
The news and posts on social media might only confuse and cause you to feel fear of the unknown and what to expect. This is not a guide to recessions or current economic conditions but on the tactics and strategies you can use today to survive any turbulent economic times, whether it’s next month or in ten years!
Recession-Proof Your Budget
During a recession or an impending recession, you want to be mindful of your finances and create or revise your budget. Pay particular attention to where you’re spending and where you can cut things out to save money — then cut immediately.
If you don’t already follow a tight budget, many resources can help determine what the right budgeting system is for you, from the envelope system to the zero-based budget, the 50/30/20 rule, and more.
Create a Savings Plan
To protect your assets, you need to plan ahead to ensure you can cover expenses for your household and business. Here is our advice for creating a savings plan:
For your household: Save six months of living expenses.
For your business: Save three months of expenses.
We’ve said it for nearly three decades now, but cash is king. Bulking up your savings accounts and setting aside even more than you think can help in hard times but also provide significant peace of mind and improve your mental health.
That way, if anything goes wrong, you have some wiggle room while working out a Plan B that doesn’t result in losing your home or business.
Invest in Yourself
There might be fear and apprehension around whether or not you should invest during a recession; however, that isn’t what some leading industry experts suggest, like Warren Buffet, on investing during an economic downturn as the strategy that has made him rich.
“Bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.”
While there is always a risk that stocks can lose value, they also tend to perform very well over time, so don’t cash out now! Want a guaranteed return for your Buy and Hold strategy? Invest in tangible real estate. As we say, people will always need somewhere to live.
Instead of pulling money out of your savings account, invest any surplus dividends back into the stock market and invest in the future! If you have flexibility through a HELOC or other means to purchase investment real estate, now is the time.
Don’t Panic
With the previous hot market changing its temperature and starting to cool down, remember — don’t panic! The history of recessions in the United States shows that they are natural yet painful parts of the cycle. The U.S. has had 12 recessions in the last 100 years with an average duration of 10 months. Remember: devise a strategy and work the plan to weather the storm.
If you have questions about your opportunities to buy or what it might look like to sell in today’s market, reach out to us! Don’t believe what you read online.
What to Expect
Housing inventory will stay on the market longer due to increased mortgage rates which have resulted in less demand. Buyers, this is good news for you! According to the NAR, a coming recession might help drive home prices down from the almost 15% inflation they were in late March. Even with a drop in listing prices, they shouldn’t fall to such low levels that equity will be wiped out. Remember to recession-proof your budget, create a savings plan, invest and yourself, and most importantly, don’t panic.
