Last year, due to increasing inflation and limited economic output, many worried that the country was headed toward a recession. To combat these conditions, the Federal Reserve has been raising interest rates progressively ever since, a move that also has implications for the housing market. And while interest rates are different than mortgage rates, the two have a cause-effect relationship. In other words: When interest rates go up, so do mortgage rates. The inevitable result of pricier mortgages? Fewer buyers with the motivation and means to make viable offers.

Although we’re technically not in a recession at this moment and mortgage rates have been at a 4-month low as of late, it’s always helpful to prepare for whatever the future might hold.

On that note, here’s everything you should know about buying a home when the market’s down today.

#1 Be Ready To Adapt: The current market has caused interest rates to rise instead of fall, thanks to the Fed’s efforts to curb inflation. Rising rates typically increase the cost of obtaining a mortgage to purchase a house, which, in turn, lowers the demand for homes on the market.

And what about the buyers who choose to remain in the market during times of uncertainty? They often end up changing their expectations. At the end of the day, many buyers are confronted with a question: What’s more important, buying the home of your dreams today or making an investment that sets you up for future success?

#2 Home Prices Might Be Lower: While the cost of financing a home typically increases when interest rates are on the rise, home prices themselves may actually decline. Why? Because decreased demand and less buyers mean that fewer people are competing for the same inventory of homes. When competition for homes dries up, sellers lose the upper hand they enjoy in a roaring seller’s market like we’ve seen in recent years, meaning they will likely have to settle for less than their initial asking price. And while that might sound grim for sellers, the silver lining is that it can be good news for hopeful homebuyers.

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➤ Are you thinking about buying a home in the near future? Read these posts next:

• How to Buy the House You Rent
• How to Buy a House in DC from Out of State
• Why Work with an Agent to Buy Your Next Home

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#3 You Might Have Less Competition: A recession often puts people in a difficult financial position, leaving them unable to afford the luxury of a new home. This results in less competition within the market for those who can still afford it.

#4  Lending Requirements Will Likely Be Stricter: To protect their profits during a recession, lenders may institute stricter requirements on mortgages to decrease the possibility of a borrower being unable to fulfill a loan.

#5 Expect Fewer Options: With less competition and lower prices, some sellers may choose to take their home off the market and wait it out, leaving less available inventory for buyers to choose from.

The bottom line? Recessions can often push buyers out of the market, but that’s not necessarily because it’s actually a bad time to buy. In fact, if you can afford to, a recession can be a great time to buy a home, because when demand slows, buyers can usually get a better deal on the home they want — without the steep competition and untenable bidding wars to contend with.

Anxious to make moves? Our qualified team is here for you whenever you’re ready to start your search. Book a consultation here.