How to Avoid the Next Real Estate Market Recession
Many economists and those working in the real estate industry are predicting a possible recession in the next couple of years. If there’s a time to prepare for a possible real estate market recession, it would be now.
For the more experienced businesses, entrepreneurs and companies, the recession is a big wave that they have already learned how to safely surf through. However, many newcomers who didn’t really have any experiences with downturn yet will likely be trying to stay afloat.
As a new company, how can you avoid a possible recession?
Be on the offense as well as defense
According to longtime real estate broker Long & Foster, they were able to survive previous recessions by keeping their focus on their core areas such as mortgage, real estate, and property management. They aren’t just trying to defend and recession-proof their business, they are also going on the offensive so they can stay in-line with the industry’s ever-changing realities.
Based on what they said, you need to keep on identifying the best strategic investment that conforms to your needs as well as your clients. For example, investing in technologies that make it easier to work with clients from two different places could be of great help.
OwnAmerica CEO Greg Rand believes that single-family rentals (SFR) will be able to benefit even if the recession hits home prices.
According to Rand, SFR is entirely different than housing in general. Each house has two purposes: tenant occupied and investor-owned or owner-occupied. This provides two exit strategies which no commercial asset class provides.
Apparently, a rate decline could trigger a mini-refi boom. This would address the challenges which are currently being faced by the industry due to refinancing volume. In turn, the net result will likely be increased for mortgage originations.
You can add marketplaces for a variety of areas such as auto loans, personal loans, small businesses loans, and more.
Know when recession might happen
To be able to prepare your company, you need to have the capacity to predict the market and tell whether the industry is changing for the worse or the better. There are different trends in real estate that allows you to predict the upcoming movement of the market.
Perhaps the first sign you should try to find is an increase in unsold inventory. The next sign is that the occupancy has fallen below the long-term average. Finally, there will be an increase in the interest rate.
When you see these signs in the market, it’s best to start preparing your business. One of the best ways is to build an emergency fund that you can use when times are rough.
Real estate, in general, is likely going to feel a milder version of the recession compared to various other areas. This might be due to the lack of inventory in the real estate market which results in the lack of catalyst.
However, the real estate industry is already in the expansion phase – creating more properties and upgrading the old ones. Still, it’s a long way off to a possible recession. In the event a downturn in the economy does happen, the real estate industry will not be the trigger.
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