What Happens to Albuquerque Mortgages During a Recession?
During a period of expansion, there is always a recession, which is often referred to as a pause in the economic cycle. Even though recessions end, they still cause damage along the way. In addition, they affect the Albuquerque real estate market and interest rates.
Low unemployment, manufacturing growth, income security, and steady or climbing interest rates are all signs of a healthy economy.
Recessions can happen suddenly or gradually. During a recession, unemployment is high for several months. Uncertainty may cause people to spend less, so business earnings decline. When companies tighten their budgets, jobs may be lost in manufacturing.
How Does a Recession Affect Mortgages and Interest Rates?
In an economy with less spending, money does not flow as freely. In times of recession, the Federal Reserve often adjusts interest rates to minimize economic disruption. This can stabilize the markets and increase consumer confidence, which can encourage more spending.
Mortgage and loan rates are then set using the adjusted interest rate.
When the economy is struggling, people are less likely to spend and prefer to save, so loans aren't as in demand. Home prices during a recession will often decline.
What Happened During the Great Recession?
Because of the housing crash that triggered it, the Great Recession lasted from 2007 to 2009, and it had a huge impact on mortgages and the housing market.
The price of homes fell quickly across the country, while employment soared. The average homeowner owed more on their mortgage than their home was worth. Many homeowners faced foreclosure.
That’s not always what happens during a recession, though. In most modern recessions, house price appreciation has stayed relatively steady, and year-over-year growth in home sales has only declined a bit.
Home prices and the sales of existing homes don’t inherently go down because there’s a recession.
What typically happens is that the housing market can benefit during a recession. Monetary policy is loosened to stimulate the economy, leading to lower mortgage rates. This increases homebuying power, and homes become more affordable if people are willing to spend.
You Could Refinance
If there were a recession and mortgage rates went down because of it, in theory, if you had an existing mortgage, you could use it as an opportunity to refinance. Of course, to refinance you have to be approved by a lender.
That can be more difficult during a recession both because of economic factors and things happening in your personal finances.
What About Buying During a Recession?
While it can seem scary, buying a home during a recession can be a good long-term financial decision if you’re in the position to do it.
You may face less competition among buyers, lower housing prices, and lower interest rates. Since there’s diminished consumer confidence during a recession, you’re not likely to face the bidding wars that homebuyers are dealing with.
Of course, you’d have to have a steady income and be confident that it would stay the same for the foreseeable future.
In the end, recessions come and go. Understanding how they affect Albuquerque home values and mortgages will help you ride the next one more smoothly.
HOT ALBUQUERQUE PROPERTY OF THE WEEK!
4501 ATHERTON Way NW, Albuquerque, NM
Exquisite custom Tuscan home-in the gated community of Oxbow North. Impeccable hand crafted cabinetry throughout, travertine tile with inlay, gourmet kitchen with Wolf Appliances and Sub-Zero Refrigerator. Commercial grade radiant heating system (plus central forced air).Two master suites, 3 custom fireplaces, tiled balcony with breathtaking views of the city and mountains. Surround sound in great room and loft area, 4 car tandem garage..and so much more. Enjoy your next memorable home.
Contact us today to help you buy or sell your next home in Albuquerque. Looking for the perfect home for sale in Albuquerque? Our easy-to-use home search tool can help you start the process. Join us twice a week on our blog for more real estate advice and great reasons to buy a home in Albuquerque and the surrounding area. Follow us on Facebook for the latest Albuquerque real estate updates.
Get your Morning Inspiration with the Sandi Pressley Team
