Recession: Best Time to Invest in Real Estate

Recession: Best Time to Invest in Real Estate

What is the Best Time to Invest in Real Estate

The coronavirus has created an economic storm that is putting stress on several business sectors ranging from transportation to hospitality and agriculture. But an economic slowdown may be a reason to buy real estate since this investment speaks to a variety of investor needs, including diversification and income generation. So it is important to understand the value of property investments in a portfolio during a recession.

“Real estate is an interesting asset,” says Mihal Gartenberg, an agent at New York-based Warburg Realty Partnership. “When the stock market is doing poorly, investors who are looking for other opportunities find that real estate is a safe haven.”

Gartenberg says incorrect assumptions about real estate prices and recessionary environments can keep investors from pursuing a property investment, whether it is a real estate investment trust, known as a REIT, or buying rental properties.

“The fact that the last recession was caused by the real estate bubble has remained strong in investors’ minds, making them think that recessions lead to depressed real estate prices,” she says. “Even though during three of the last five recessions, real estate values actually increased.” Wtop

When the market is soaring, it’s easy to forget that what goes up can also come down. But 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 just need to know which ones.

Find a financial advisor who can help you build a recession-resistant investing plan.

1. 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 completely. When the rest of the economy is on shaky ground, there are often a handful of sectors that 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 are still going to 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 question whether the coronavirus would lead the U.S. into a recession, but the hoarding of toilet paper makes me think it’s certain. Not because we’ll run out of toilet paper—the U.S. and Canada produce volumes of it—but because hoarding means consumers are really worried and are changing their spending behavior. 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 the last few years.

Consumer debt, even after you consider inflation, 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 in an earlier post, this year was already a challenging time for investors because the economy was slowing. I didn’t expect a severe slowdown this soon, but when the economy is fragile to start with, anything can happen. Forbes

Real Estate investment during the Great Depression

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 really 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 of them shared drops in stock prices and consumer confidence—and they were all good 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 can prices 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 just as important as finding a low-priced home.

Make an honest appraisal of your own 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 it is that 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 take the form of 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 decided to focus on the biggest question on 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 strongest 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

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