Slowing global growth, slowing GDP, trade disputes, Brexit uncertainty and now impeachment investigations…no wonder more and more economists are forecasting a recession in 2020.
How would a recession impact property investment in this country? Patrick Kearns of InmanNews asked just this question of several real estate professionals and economists and here are some of their answers.
Mathew Gardner, chief economist with Windermer Real Estate, looked into median home values during recessions since the 1950’s and “…what happens is, other than the last one (in 2008 when housing was the cause of that recession), housing values just plateau. They flat-line.”
And because housing values flat-line, Gardner believes housing is “a pretty good investment” during a recession. Why? “Everyone is chasing any kind of return for their cash. Given that borrowing is remarkably cheap, yeah, it can be (a great investment) because where are you going to get any other form of return?”
George Case, an agent with Warburg Realty, advises willing property investors to target markets carefully. “Purchase in areas that are consistently in demand. While prices do fluctuate, (in-demand markets) are the first to rebound as the economy strengthens and the first to experience spikes in pricing in seller’s markets.”
Case also advises willing investors to team up with a “reliable realtor” who is able to provide thorough price analyses y/y and comparable markets.”
Svetlana Choi, a broker with Warburg Realty, thinks a recession “is a great time to invest. If you are willing to hold onto (the property), then it will gain in value.” Choi advises investors to be on the lookout for “ambitiously priced” properties. “There will be NO appetite for over-paying…”
Short-term rentals may have an edge over hotels during a recession but that edge would be localized to specific markets, according to LendingTree’s chief economist Tendayi Kapfidze. “It’s likely travel spending will decline in both frequency and price point and lower cost lodging may steal some share from higher priced alternatives.”
Kapfidze also believes that longer-term rentals may be profitable for investors who are financially and psychologically willing and able to own or invest in a rental property. Why? There may be more “forced renters” in the midst of an uncertain economy and slower/lower market growth. “…investors could benefit on both the cost and revenue sides of the equation.”
Windemer’s Gardner agrees. “Consumers usually get a bit of paralysis during times of economic uncertainty.” “Wait-and-see” attitudes are more pervasive. Consumers “…wait and see when the economy begins to grow and/or when they become more confident in their employment situation.”
Also read: https://timandjulieharris.com/2019/10/02/nyc-prices-plunge-while-rents-soar.html, https://timandjulieharris.com/2019/10/01/how-telecommuting-is-changing-real-estate.html, https://timandjulieharris.com/2019/10/03/nars-q2-2019-commercial-real-estate-trends-and-outlook.html
