Why You Need to Stop Trying to Predict the Next Real Estate Market Crash!

by | BiggerPockets.com

Where’s the real estate market going in 2019?

Everybody wants to know. It’s been a little squirrelly, going up and going down—it’s kind of all over the place.

So a lot of people want to know. What’s it going to do?! I’m going to tell you.

Related: 6 Ways to Prepare for the Next Market Crash

When Is the Next Real Estate Market Crash?

Here’s the thing. My crystal ball, it’s broken. I don’t know what the market is going to do!

Your crystal ball is broken, too. In fact, nobody absolutely knows where the market is headed.

I’m sure there are plenty of people with opinions, with thoughts on what the market is going to do. But one thing I can promise you is that nobody absolutely knows.

I’ll tell you the only thing we can know: it’s going to change. That’s what markets do. They’re not stagnant.

It may go up! I know there’s a lot of people who think that it won’t. They think that it’s definitely going to go down.

But they don’t know that. Markets are dynamic. All we can know for sure about them is that they will change.

Nothing ever stays the same in markets. There’s supply and demand, and so things go up and down. That’s guaranteed to happen.

How to Prepare for Real Estate Market Swings

So here’s what you can do to prepare yourself for the upcoming year:

  1. Listen to trustworthy investors. Consider what people you trust think is going to happen. But be careful with anyone who tells you that they absolutely know. And don’t listen to anyone who tells you that it’s absolutely going to go down “because it’s due.” That’s not how it works.
  2. Hedge your bets. Prepare yourself for change, but don’t make any rash decisions based on someone else’s opinion. They don’t have factual data about the future. Don’t do sketchy deals. Bake in a “just in case” factor, so that if the market were to go drastically down, it wouldn’t devastate your investing business.

Watch my video above, where I go into further detail about why the market is, and will always be, unpredictable—no matter who tries to tell you otherwise.

How concerned are you about where the market is headed? Why? What are you doing to prepare? How is it different from the way you’d normally be investing?

Let’s talk in the comment section!

 

About Author

Matt Faircloth

Matt Faircloth, Co-founder & President of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, New Jersey, is a developer and owner of commercial and residential property with a mission to “transform lives through real estate." Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to owning and managing over 370 units of residential and commercial assets throughout the east coast. DeRosa has completed over $30 million in real estate transactions involving private capital including fix and flips, single family home rentals, mixed use buildings, apartment buildings, office buildings, and tax lien investments. Matt Faircloth is the author of Raising Private Capital, has been featured on the BiggerPockets Podcast, and regularly contributes to BiggerPockets’s Facebook Live sessions and educational webinars.

4 Comments

  1. Vaughn K.

    Technically totally correct! Nobody ever knows for sure.

    The way I like to think about things is simply probabilities. In all likelihood it is far more likely the market will go down, or stay flat, rather than see massive increases… Because the math says we’re running out of upside potential in most of the country. Many places are just a touch over valued, if at all… But most trendy cities are waaay over valued. Where I live, I’d put it at 95% odds it will be flat or go down, if it goes up at all it will be minimal. If I had to guess about 2 years from now I’d probably be 98%! In Des Moines or whatever it may be the opposite, I don’t know. So it’s all local anyway.

  2. Jason Merchey

    Much of the fundamentals of investing should hold true even in a downturn – at least in the SFR division of residential. Example: Don’t ever have less than 25-35% equity in a place. Make sure it cash flows at the rate of 1.2-1.5 DSCR. Don’t take a “teaser rate” for a loan. Don’t invest such that your bank account is too thin. Be prepared to take back management of units in case you need to recoup 7-10% that you’re currently paying to a PM. Fixing and flipping can leave you a little more exposed, but it doesn’t have to be reckless – if you build 15-20% profit into your calculation, well, if you have to drop your sale price by 13%, you still avoid a big disaster. In sum, I think it matters where in the cycle of recession-recovery-expansion-decline we are, but it doesn’t mean that it is like the four seasons and in summer you vacation and winter you hibernate. Stay invested, and keep the fundamentals strong. Anyone who lost a huge amount of money in 2008 and saw a number of foreclosures was probably “irrationally exuberant” in 2005-2007 and made some unsafe investments.

  3. Jana Prevatt

    Hmm, good advice. =)

    But one thing driving me absolutely NUTS is the double-spacing between each set of 1-2 sentences. Is anyone else bugging on this?
    Does this site need a bloggers editor? If so I can chip in about 20 hours per week to tweak minor mistakes & formatting issues.

    It just drives

    me nutty

    all the

    time

    when folks consistently

    double space

    between every

    other word

    or

    sentence.

    LMAO sorry if I offended anyone =) Peace, Love & Smiles

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