With everything going on, many investors are wondering the same thing: Will the real estate market crash?
Is your financial advisor trying to continue to tell you that stocks are a safer investment than real estate? It’s time to tell them to pound sand.
Before I get into what happens if the market crashes I want to tell you why real estate is always going to be the safest investment.
Just like everything else real estate is not immune to market changes. However, real estate is by far the safest investment strategy ever known to man. Not only is it the safest investment, but it’s also one of the most lucrative long term investment strategies.
Don’t believe me? Let’s look at some data.
Most people look at short data points to make a specific point that fits their agenda. Well, maybe I’m no different because every single financial advisor is rolling their eyes at me saying “of course Greg thinks real estate is the best investment… that’s what he does for a living”.
But here’s the thing about real estate, real estate never goes away. It’s tangible, meaning I can physically go out to a property I own and touch it, feel it, and it pays me every month like clockwork.
So we can look at data for decades without skewing the data. Companies that your mutual fund manager/financial advisor has invested you into over the past can and most likely will go out of business unless you’re investing in blue-chip stocks only. And heck, even some of those fail. Ask the people who invested in Enron.
But will the real estate market crash?
The million-dollar question is whether or not the real estate market will crash.
Here’s the thing. No one, including me, has a crystal ball. Having said that, at the time of the writing of this article it is very early on in the global pandemic of the Coronavirus and the disease it causes Covid-19. There’s not enough data to really tell me or anyone else exactly what is going to happen to the real estate market over the next 90 days, 6 months, or especially 12 months.
Having said that, I do have some bold predictions for the future of the real estate market.
The market will take a hit. In my professional opinion, the real estate market will take at least a 10% hit over the next 6 months.
Why? The United State’s unemployment numbers continue to soar. When people are losing their jobs by the millions every week that means the buyer pool for housing will drop. The people that rely on low money down/out of pocket to buy houses are no longer going to be able to qualify for loans.
The real estate market will start to see longer DOM (days on market). Due to my first prediction of the buyer pool shrinking, only the strongest of buyers will be out shopping for houses to purchase. This will affect how long houses are staying on the market which means the demand for houses will go down. Hence the 10% price hit in prediction #1.
This means that only people who are using conventional financing with 20% down will be the ones that are able to buy houses. We’re already seeing volatility with other financing types such as FHA and VA backed loans.
The real estate market will bounce back tremendously after the Coronavirus pandemic is over. I truly believe not only that the real estate market will rebound, but it will skyrocket. People will get their jobs back, the economy will reopen, and people will want to buy houses again. Especially those who have been cooped up in their small apartments for a long period of time.
So… What to do?
I’m not telling you that you need to run out and buy a bunch of real estate today. I’m telling you that the fundamentals of real estate investing haven’t changed. Everyone, and I mean everyone, including sophisticated investors and novices alike are scrambling to make the right decision when it comes to investing in the real estate market.
The best thing you can do is take a deep breath and look at every opportunity as if there will be another one tomorrow. There will be plenty of opportunity to buy real estate at a discount in the near future and take advantage of the change in the real estate market that is coming.
I wish I had that crystal ball to tell you exactly how bad this is going to get or not get. One thing I know is that I’m still going about my daily business, putting together marketing directly to homeowners for off-market houses, making offers on listed houses, and renovating the projects we have going.
Good luck out there and let me know if there’s anything I can do to help.