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by Brodrick Perkins       broderickperkins.jpg

Consumer Reports is advising consumers to recession-proof their financial future by taking steps to shield four areas of financial life that are vulnerable to a shrinking economy.

Housing is one of those areas.

Even though economic growth is chugging along just ahead of the traditional definition of a recession — two consecutive quarters of decline in the Gross Domestic Product — some economists say the nation is skirting precariously close to the edge of economic rupture.

UCLA Anderson Forecast economists recently reported the economy is “certainly close” to a recession even as it conceded an economic about face is not imminent.

Consumer Reports says because a recession is declared in hindsight, consumers who wait for the announcement will put their finances in peril.

Along with the three areas of financial life that need attention now — investments, borrowing and employment — a fourth area, housing, is already taking a beating in a growing number of markets. Housing woes are symptomatic of recessionary conditions.

Here’s how Consumer Reports suggests homeowners prepare to get through hard times that could be ahead.

  • Sit tight. If you don’t have to sell your home don’t. As some markets already reveal, flat and falling housing markets can make a sale elusive for even the most attractive property. If you can wait, wait until the market gathers steam and becomes a better environment for home sales, says Consumer Reports.
  • Be flexible. If you are “motivated” to sell, because you have to move, say, because you want to take on a new job, avoid foreclosure, move up or move down, let your motivation show. You may or may not have to lower your price, but you’ll have to consider that possibility. Concessions could also include paying costs typically paid by the buyer, paying closing costs, paying the first six month to a year of homeowners association dues, and offering incentives, say a kitchen full of new appliances.
  • Make your listing appealing. Consumer Reports is big on curb appeal because it gets them in the door. Curb appeal is the first impression your home conveys to prospective buyers, it should create an emotional desire to own the home and enjoy the lifestyle and status it represents. Putting the best face on your home motivates buyers to cross the threshold and take that first step toward closing the deal.
  • Buyers, be aggressive. Strong buyers’ markets have emerged from the downturn and that can mean lower prices and more haggling room, conditions that edge homes into a realm of affordability you may not have seen in recent years. Just don’t buy more than you can afford. Buy what you need and buy what you’ll keep long enough to weather the soft market, Consumer Reports advises.
  • Lock down interest rates. Recessionary conditions typically come with lower interest rates and Fannie Mae last week said the average fixed interest rate on a 30-year conforming mortgage was 6.34 percent plus only half a point. That’s less than it was a year ago at 6.4 percent.Lower rates are designed to stimulate economic growth but they also give you an opportunity to put the reigns on adjustable rate mortgage (ARM) rate resets. Even if the current rate gives you a slightly higher payment, in uncertain economic times it’s key to go with fixed payment amounts that are much easier to budget. Ditto for your home equity line of credit. Switch to fixed rate.
  • Nip, tuck consumer debt. Don’t let low rates lure you into more indebtedness. To the contrary, it’s time to pay off and pay down debt before rates climb, especially if you worry about job security. Consolidate debt — provided you have the will not to become a serial refinancer — to make monthly payment more manageable. Use a refinanced first or an equity second as your consolidation tool to reap tax benefits, Consumer Reports says.
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