Fears of a recession are looming large right now—and while we aren’t technically in one yet (that would require two consecutive quarters of negative economic growth), even the possibility of a recession sends worrisome ripples throughout many areas of our lives, and the housing market is no exception.
For homebuyers, a recession could be that final factor that, combined with rising interest rates and high home prices, prompts many to shelve their house hunt until conditions improve. For home sellers, a recession could mean the raging seller’s market they’ve enjoyed for the past two years could be waning, dragging down home prices and profits.
Granted, some of the market changes happening right now can be blamed on the season. (The market typically relaxes a bit in summer.) But some say there’s something more serious afoot.
“This year, we saw the typical seasonal pattern, but the summer cooldown is more pronounced,” says Ali Wolf, chief economist of building consultancy Zonda. “Prospective homebuyers are balking at the cost of homeownership, driven by high home prices and rising interest rates. And fears of a recession aren’t helping.”
Amid this gloomy economic outlook, many home sellers might fear that they’ve missed the boat on raking in substantial profits. But that does not need to be the case, provided they make some recession-friendly adjustments to their tactics.
Here are a few new realities and rules to keep in mind, in terms of pricing and upgrades and more, so that home sellers can still come out on top—recession or not.
Hit the market sooner rather than later
In recessionary times, home prices have a history of dipping. Yet experts say homeowners may still have time to pull off a highly profitable sale if they get their listing up pronto.
“If [sellers] are interested in taking advantage of this wave, now is the time, not later,” says Chantay Bridges, a real estate expert in California.
Many homebuyers, after all, are rushing to buy a home before interest rates rise even higher, and this panic can work to sellers’ advantage. Plus, if a recession does hit, it may help curb spiraling mortgage rates, thereby increasing homebuyers’ borrowing power.
For now, the number of listings is creeping up but still at historic lows, so demand for that limited inventory will remain strong, particularly in hot markets.
“There is still a tremendous buyer-seller imbalance, and it could take years to change that,” says real estate agent and property manager Bryan Kyle about his market of Las Vegas. “People are affording less with higher rates, but everyone still needs a home. Rent prices and recent rent increases here are off the charts, too.”
As a result, he adds, “We don’t believe prices will fall here, and if they do, it will not be much.”
So, while hitting the market soon may be advantageous, Kyle’s message is clear: Don’t panic.
“We are still on very solid ground,” he says.
Don’t overprice your home
Choosing a list price can be a tricky business for any homeowner. Price too high and you might not drum up much interest. Price too low and you may get offers you’re not happy with.
“Sellers who are just coming into the market need to know that it is no longer a seller’s market where they can get 20% over list price, as is, with no contingencies,” says Lauren Risley, a real estate agent in St. Louis and the host of HGTV’s “Call the Closer.” “I believe, for the most part, those days are over. The market is essentially correcting itself and old standard practices of negotiating price, doing inspections, and being contingent upon an appraisal will be back in play.”
Wolf agrees that “aspirational pricing” could be a mistake.
“Buyers are a lot more discerning when purchasing a home today compared to six months ago,” she says.
Kyle notes that sellers shouldn’t worry if they’re seeing price reductions in the market.
“The homes here that are priced where they should be can still sell very quickly, but the days of double-digit appreciation are over for now,” he says. “If you are hearing about big and numerous price reductions, it is because the asking price was more than even the highest comparable sales could support in the first place.”
Sellers shouldn’t feel cheated if their home sells for less than the astronomical rates we’ve seen in the recent past—the market is finally just evening out.
“We saw some unprecedented sales in the last couple of years, and now, while it may seem like home prices are dropping, they’re really just heading to a more reasonable price range,” Risley says. “It’s not anything new and different. It’s just going back to how most people have experienced homebuying.”
Make smart, cost-effective updates to get buyers’ attention
To stand out in the market, sellers should make their home attractive to buyers, which usually means some selective updates.
“People are always going to want to feel happy, cozy, and comfortable in their homes,” Risley says. “I think even during a recession or a time when people are more frugal and conservative with their spending, there are some smart and easy upgrades that can be done.”
She points out that the majority of any renovation is the cost of labor, so sellers should think about projects both inside and outside their home they could do themselves.
“Painting the inside of your house can make it feel like a whole new space. Try doing just one color throughout to create more of a flow and open feel,” Risley says. “If you want to add some pizazz, maybe a pop of color in the bathroom or even some crazy wallpaper on the ceiling in one of the rooms. Other easy projects are changing out the light fixtures and even the faucets in your kitchen and bathrooms. If you’ve always had nickel or bronze, try swapping out with a matte black or even a gold finish.”
Homeowners don’t need to renovate the whole house either.
Bridges says focusing on just a couple of important rooms can make a big difference.
“The best return on investment are kitchens and bathroom remodels,” she says. “Most bedrooms are just boxes, and the furniture plays a more significant part in making them look nice. However, homebuyers love beautiful kitchens and bathrooms.”
Consider renting out your home
While a recession might not hit all sellers as hard as many fear, an unfortunate few may not have luck finding the right buyer. If you’re hesitant about selling right now, Kyle suggests considering renting it out. Rental property rates have been at an all-time high, and renting out a home could help a homeowner earn some passive income while they wait for the market to change again.
To do this, he urges homeowners to find a reliable renter who will care for the property and not wreck your investment. Plus, he warns against getting stuck with a renter who can’t pay on time.
“Don’t let a tenant’s financial challenges become your challenges,” says Kyle.
Plus, if you haven’t rented out a home before, it’s imperative to get help from someone who knows what they’re doing.
“Hiring a good property manager should be the first step,” he says.