By definition, a recession is “a significant decline in economic activity,” but that’s a pretty broad statement. In more concrete terms, many economists identify a recession as a decrease in a country’s Gross Domestic Product (GDP) for two consecutive quarters. Following this definition, the United States technically entered a recession in the summer of 2022. (But economists are still pretty divided on the technicalities and semantics around that.) As of 2023, experts have concluded that a recession will occur— it’s just a matter of when and for how long.
What Happens During a Recession?
At any rate, the idea of a looming recession is enough to spook anyone into cutting back on unnecessary spending and budgeting their money a little bit better. After all, the effects of a recession can include the following:
- More layoffs & an increase in unemployment
- More competitive job market
- General decline in manufacturing & services
- Decline in retail sales
- Decreased spending across almost all industries
- Difficulty securing loans from financial institutions
- Higher interest rates
Of course, the economy isn’t always so straightforward. The recession’s short and long-term effects can compound and play into one another. For example: It’s widely known that people tend to spend less money during a recession. This decrease in cash circulation can lead to an eventual price drop as the economy cools off.
Looking to learn more about the effects of the recession? Check out these helpful resources:
- Recession – Definition, Indicators, Causes, and Effects – Corporate Finance Institute
- How Does a Recession Affect Me? – Forbes
- 5 Ways a Recession Could Impact You – Bankrate
Should You Move During a Recession? What You Need to Know
Whether for a new job, personal reasons, or just a general desire to be somewhere new, you may find yourself planning a move during an economic downturn. (As it turns out, recession or not, life goes on.) Sometimes, relocation is entirely out of our control— but if you do have a say in the matter, there’s a lot to consider.
If you’re trying to figure out if now is the right time for you and your family to head somewhere new, here are some of the pros and cons of moving during a recession:
1. Your House May Take Longer to Sell During a Recession
One of the most important factors is that houses take longer to sell during a recession. Fewer buyers in the real estate market, an increase in homes for sale, and difficulty securing a mortgage are some of the biggest reasons for this. If your move isn’t on any a timeline, this may not have a major impact on your plans. But if you’re relocating for a new job or want to be established in your new home by a specific date, you’ll have to factor the general unpredictability of the housing market during a recession into your timeline.
2. On the Other Hand, House Prices May Drop
As we mentioned before, the effects of a recession aren’t always so cut and dry. Your house may take longer to sell during a recession because fewer people want to make big purchases during an economic downturn and job insecurity. However, this decline in housing sales can lead to an oversupply of homes on the market, meaning house prices can drop. (Though it may be difficult to pinpoint exactly when that will happen.)
This is great news for people looking to buy a house at an affordable price— but maybe not such great news if you’re looking to make some extra money from selling your house during a recession.
3. A Recession May Make it More Difficult to Get a Mortgage
When a recession hits, banks and financial institutions typically become more cautious than ever when lending out money and approving loans. Periods of economic downturn mean that, financially, times are tough all around. And while it’s true that there will always be borrowers that default on their loans regardless of the current economic state, a recession means that the probability of this happening is higher than usual. As a result, lending requirements become stricter. Depending on your situation, you may need a higher credit score and down payment to qualify for a mortgage during a recession.
4. On The Other Hand, Having a Fixed Mortgage May Bring Stability
However, if you can secure a mortgage at an affordable rate during an economic recession, it can be a great option. It’s no secret that in 2023, inflation will continue to be a problem. Everything from gas prices to the amount you spend on your weekly trip to the grocery store will likely increase. Unfortunately, many people’s salaries won’t be adjusted accordingly by their employers.
An increased cost of living can be incredibly stressful. But a fixed-rate mortgage can help ensure the predictability and stability of at least one aspect of your finances during this uncertain economic time. As long as you retain a stable income, you’ll be set with your consistent principal and interest payments while others face record-breaking increases in rental rates across the country.
5. Changing Jobs During a Recession is Risky (But Not Impossible)
Regarding the job market in 2023 and beyond, experts advise that people should expect continued unpredictability. On the one hand, many companies are actively hiring talent— especially in the restaurant and hospitality industries. But at the same time, other companies are experiencing hiring freezes, budget cuts, and unprecedented layoffs to save money and get ahead of the looming recession.
So what does this mean for working professionals? With a recession expected at some point in the upcoming year, be cautious about leaving your current job on a whim without another one lined up first. Moving expenses can add up quickly, and finding yourself without a stable income after you relocate to a new city can put you in a bad situation. One great solution is finding a remote job that allows you to work from anywhere. You can also consider “on-the-job searching” to eliminate periods of unemployment.
6. Moving Far Away from Family and Friends Can Eliminate Your Built-In Safety Net
Do you currently live near family members or have a tight-knit group of friends in your neighborhood? Maybe you frequent your parents’ house for dinner on weekends or rely on relatives to watch your kids when you’re in a pinch. For many people, having a close network of friends and family nearby is a significant factor in everyday routines. That’s why it’s essential to consider how moving away might make things more challenging— especially during a recession.
With a smaller (or nonexistent) support network around you, coordinating childcare, completing major house renovations, getting help in an emergency, and other situations that may pop up become exponentially more difficult. Even if you’re not financially dependent on your family in any way, moving far away from home can be just as challenging from an emotional standpoint.
Bottom line: Moving far away during a recession can be financially and emotionally costly. If it’s within your control, consider how being far away from family and friends will impact your day-to-day life before deciding whether or not to move.
Is Moving During a Recession a Good Idea for You?
It’s great to weigh the pros and cons of moving during a recession before making a concrete decision. Selling your current home, obtaining a mortgage, and finding a stable job are all important aspects to consider. But ultimately, it’s up to you to decide when it makes the most sense for you and your family to move or relocate to a new city.
Have you moved recently or made plans to relocate during the upcoming recession? Did you move during the 2020 recession? We’d love to hear from you! Keep the conversation going by sharing your best tips and experience with us on social media.
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