Recession: Best Time to Invest in Real Estate

What is the Best Time to Invest in Real Estate

Updated June 2023

According to Mihal Gartenberg, a New York-based agent at Warburg Realty Partnership, real estate is an intriguing asset. Investors seeking alternative opportunities often find real estate a haven when the stock market underperforms.

Gartenberg highlights that misconceptions regarding real estate prices and recessionary conditions can deter investors from exploring property investments, such as real estate investment trusts (REITs) or rental property purchases. The belief that the previous real estate bubble caused the last recession remains ingrained in investors’ minds, leading them to assume that recessions resulted in decreased real estate prices. However, real estate values increased in three of the last five recessions.

What goes up must come down.

When the market is soaring, it’s easy to forget that what goes up can also come down. However economic slowdowns tend to be cyclical, which means that another recession is in the future. Whether it’s fast approaching or still a ways off, it’s wise to be prepared for its eventuality. This way, you won’t join the panicking stampede out of stocks and into cash. Instead, you’ll remember that stocks can perform even during a recession – you need to know which ones.

Core Sector Stocks

During a recession, you might be inclined to give up on stocks, but experts say it’s best not to flee equities altogether. When the rest of the economy is on shaky ground, some sectors often continue to forge ahead and provide investors with steady returns.

So if you want to insulate yourself during a recession partly with stocks, consider investing in the healthcare, utilities and consumer goods sectors. People will still spend money on medical care, household items, electricity and food, regardless of the state of the economy. As a result, these stocks tend to do well during busts (and underperform during booms). SmartAsset

Investing in Real Estate during Coronavirus

There might have been some questions about whether the coronavirus would lead the U.S. into a recession, but the hoarding of toilet paper makes me think it’s specific. Not because we’ll run out of toilet paper—the U.S. and Canada produce volumes of it—but because hoarding means consumers are apprehensive and are changing their spending behaviour. That won’t just flip back in a few months.

It’s what consumers think and do that grows or shrinks the economy, not bank failures or layoffs at airlines. Consumers are 70% of the economy, and they’ve already been on edge for the last few years.

Even after considering inflation, consumer debt is at the highest levels we’ve ever seen: $12,000 per man, woman and child. A survey done by GoBankingRates late in 2019 found that 69% of Americans have less than $1,000 in savings. And the growth of jobs in 2019 was at the lowest rate since the last recession. So, it’s not surprising that the rate at which consumers have been spending was already slipping. As I noted earlier, this year was challenging for investors because the economy was slowing. I didn’t expect a severe slowdown this soon, but anything can happen when the economy is fragile. Forbes

Best Time to Invest in Real Estate During Recessions and Depressions

Recessions and falling home prices aren’t anything new. Housing prices took a nosedive during the Great Depression of 1929, and, in hindsight, that housing recession wasn’t a good time to buy real estate in the short term because it lasted until 1939.

Dating back to 1945, there have been 11 recessions that have taken, on average, 11 months to reach their lowest point. Many shared drops in stock prices and consumer confidence—and they were all reasonable times to buy real estate.12

You should know all the pros and cons regardless before you plunge in.
Before You Buy: Be Honest About Your Finances

The question isn’t really how low prices can go during a recession. It’s how much real estate you can afford to buy before prices go back up. Paying your mortgage and riding out the downturn is as important as finding a low-priced home.

Make an honest appraisal of your financial circumstances, too—recessions don’t just affect homeowners. Job instability can turn a bargain home purchase into a financial hardship. If you’re a business owner, gauge how likely your business will continue to thrive in the current economy. Thebalance

Economic Cycle: Best Time to Invest in Real Estate

As we approach the start of a new decade, there are more questions than answers: When will the current economic cycle—the longest in U.S. history—come to a close? Should we expect the next recession to be a brief dip, a protracted slowdown, or a crash? How can property managers and investors prepare for what’s ahead in 2020 and beyond?

In this post, we’ve focused on the biggest question in Americans’ minds: How will a potential recession impact me? We dig into the following topics:

When a recession is expected to hit, and what the likely triggers are
How a recession could affect housing prices
The impact a recession will have on rental demand
How regulations will impact rental owners and property managers in 2020
Where returns will be most robust for investors in the coming year

#1: A recession is possible in 2020 and likely by the end of 2021, but it won’t be caused by the real estate market this time.

As our economy’s record-breaking expansion continues into its 126th month, talk of an impending recession is to be expected. Experts are split on exactly when we can expect a downturn to occur:

50% of real estate experts surveyed by Zillow foresee a recession in 2020, while 35% don’t think one will arrive until 2021.
41% of economists interviewed by Bankrate anticipate a recession to begin before the 2020 presidential election. Buildium

Overview

Real estate investment can be lucrative, but timing is critical to success. Generally, the best time to invest in real estate is when the market is in a downturn or when interest rates are low. During a market downturn, property prices can be significantly lower, providing opportunities for investors to buy low and sell high when the market rebounds. Low interest rates make borrowing money to invest in real estate more affordable, which can lead to increased demand and rising property prices.

The economic and political climate is another essential factor when investing in real estate. A strong economy and stable political environment can create favourable conditions for real estate investment, while economic and political uncertainty can make investing riskier.

Investors should also consider the location and type of property they want to invest in. In general, properties in high-demand locations such as urban centres or areas with growing populations tend to appreciate more quickly. The type of property, such as residential or commercial, can also influence investment returns.

Finally, investors should always conduct due diligence, including researching market trends, analyzing property values and rents, and assessing potential risks.

Insights on the Stock Market and the AI Craze: July 2023

As fear levels surge, irrespective of the intensity of market pullbacks or their persistence, a decisive course of action awaits us. It is time to finally uncork that cherished bottle of booze we’ve been carefully saving, for the escalation of fear, particularly when it spikes, serves as a compelling indicator of an imminent turnaround in the market.

Amidst the tumultuous fluctuations and uncertainty, the surge in fear signifies a potential shift in sentiment, suggesting that a transformational moment may be on the horizon. During these critical junctures, seasoned investors recognize the significance of such emotional spikes and seize the opportunity to make informed decisions.

So, let us embrace this moment with a spirit of both celebration and foresight. As we will soon crack up that bottle of booze, we saved for this moment. A strong pullback in the AI (and Hi-tech sector) is all but inevitable.

One needs to remember that in the world of finance, moments of heightened fear often herald the birth of new opportunities, and our readiness to adapt to the changing tides shall prove invaluable on this exciting journey.

The article was originally published on August 23, 2016, and has been updated over the years. The most recent update was made in June 2023.