Is It Better to Rent or Buy a Home during a Slow Economy?

The decision regarding whether to rent or buy a home is always a complicated one, but it’s perhaps most complex during a slow economy. As an economy slows, it’s hard to figure out whether a town will be booming once things go back to normal or whether staying in a locale is a form of financial suicide as far as opportunities for growth and job availability are concerned. There are some pretty easy things to consider that can help you see what your best option is.

Priority Concerns

If you are going to be staying in a city for at least five years, buying a house is probably the smartest choice, even if you plan to later sell it. Since property prices are generally universally low during rough financial times, a buyer usually makes a profit when purchasing property at this time if he waits for the economy to get back on its feet. If you’re living in a city short-term, buying is probably not going to be worth it.

You also have to look at your own credit and the money you have for a down payment. If you have poor credit, the only mortgages you’ll be able to obtain will probably offer a very low interest rate. If you are only able to deal with lenders specializing in financing to people with subpart credit, you will likely be given a bad deal. In this scenario, it’s best to wait, save money and work on improving your credit.

Buying during a Slow Economy

The advantage of buying a home during a recession is the fact that it will likely be at its lowest offered price. You’ll be able to find houses that are priced significantly lower than they would be during times of widespread financial prosperity. Sellers know that buyers aren’t typically motivated to buy during a slow ecomony, and some sellers are desperate to sell their homes because they can no longer afford the mortgage and upkeep.

Short Sale Buying

During a slow economy, short sales unfortunately become quite common. In this scenario, a previous home buyer is no longer able to meet his financial obligations to the house. The lender has agreed that selling the house for less than the current owner owes on it is better than dealing with foreclosure. When both the owner and lender agree on this, a house is put up as a short sale. A home that’s given a short sale will typically be a good price, and many buyers look to short sales during a slow economy.

Renting during a Slow Economy

As stated before, if you plan on relocating within a couple of years, purchasing a house is likely not a smart idea. Unless you then plan to rent out the house and have local friends who are willing to collect rent and keep an eye on the property, buying a home is then likely to be more trouble than it’s worth. Renting a house is probably the best option for those in such a situation.

For the same reasons that you’re able to find low prices on long-term property investments, you’ll likely be able to find lower rental rates. If you have no money for a downpayment–along with poor or subpar credit–purchasing a house likely isn’t for you. This is true even when the prices are good in a slow economy.