Who’s Ready for a Recession 2020?
Flipper/Rehabber · GA · Member since 2019 · 8 posts · 16 votes
Who’s Ready for a Recession 2020?
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesMaybe maybe not.. election year Trump wont let it happen
109 Replies
- Rental Property Investor · Arizona City, AZ · Member since 2019 · 21 posts · 15 votes7y
@Jay Hinrichs
I wish it was not so, but Trump, or any other president, is powerless to stop a recession, especially one that can potentially dwarf the GFC.
He could make it less painful though and let it run its course for a swift resolution, going contrary to Roosevelt’s style in the 30s, which prolonged the Great Depression.
- Member since 2018 · 19 posts · 21 votes7y
@Jazlynn Gibbs
Just go about your normal routine for RE investing and it really shouldn't matter if you think that is going to happen in 2020. The media is the worst to let you think that. I will just buy more rentals if it happens and better prices.
- Rental Property Investor · Toronto, Canada · Member since 2012 · 102 posts · 95 votes7y
@Jazlynn Gibbs unless the recession drops RE prices (US or CAN), it will be a non-event for me
- Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes7y
Personally, I don't think so. A correction is in the works, the gross infusion of capital has undoubtedly diluted the markets beyond reason.
But if we do get a recession, it's like the seasons, there is always spring after winter 🌤️ You can always bet on it!
For some smart investors, the recession or correction will come and go just like the season and some might not even notice it...
Right formula = strong market(s) + conservative underwriting + juggernaut cash flows 💵💵💵
This should mitigate some of the risks associated with a downturn or correction.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes7y
Originally posted by @Erik W.:
I would like to address the comment "no one would wish a Recession on anyone". That is not always true. Recessions benefit those who have been priced out of a market. If 2009 had not happened, what would prices look like in California, Nevada, Arizona, and the hot East Coast Markets? A Recession is simply a natural correction to overheated markets.
People have a funny tendency to be irrationally exuberant. They will keep bidding up prices higher and higher, and as long as lenders are willing to lend, then lower and sometimes middle income people get priced out of the market. Recessions bring irrationally exuberant bidders and high prices back down to earth when nothing else will.
Is there a lot of pain? Yes, certainly. But one should always ask, "Is the alternative better?" In this case, had prices not come back down significantly, it is unlikely that anyone with less than a 6-figure income could afford to buy a home in desirable markets today.
There are many unpleasant events aside from financial recessions that cause devastation and suffering, but the alternative is the status quo. Sometimes, the cost of maintaining the status quo is HIGHER than the cost of the negative event. Consider War. Ask any person liberated from German rule during WW2 if they wished for War, and they will say, "YES!" The alternative was death.
So the question is, "Who benefits and who loses in a Recession?" There are always some on either side. Our goal as investors is to be on the "benefit" side.
Do you think the last recession was good? Tell that to my neighbor, who's son was a contractor and killed himself in 2010 after his thriving business tanked and the creditors came demanding their money. Tell it to my old coworker who was 55 in 2008 and lost his job, never to find one again. Tell it to my 40 coworkers, who lost their jobs in 2009. Many of which who had been with the company over 20 years. I was standing there when it happened. Tell it to the hundreds of thousands who lost their homes, jobs and suffered for years.
You don't need a recession to have housing prices stabilize. Most recessions are not even housing related. A thriving economy lifts everyone up. The simple answer for some people who struggle to afford housing is find a better market. The idea that an entry level employee can easily afford housing in high cost markets is illogical. They will always be on the losing side and in fact low wage people are the ones hurt the most in a recession.
A good investor can succeed in any market, bad investors need a good market.
- 7yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
@Tanner Marsey I agree. I’m so sick of the recession posts that I’ve contemplated deleting BiggerPockets.
The Moorhead Team5140 Reviews - 7yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
"What I do know, is that if we do not act soon, it is our children and our grandchildren who will have to pay the price."
- Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes7y
You took my post entirely the wrong way. I am NOT wanting a Recession. I am simply saying one WILL occur. And there are SOME people who benefit from that who are not investors. I would bet you $10,000 right now if we were standing next to each other that there are MANY people right now hoping for a Recession, and I would win that bet, easily. They are the people who would like to buy / rent a home but can't. They have have seen the median home prices climb back up to $600,000 and monthly rents in excess of $3000/month in Los Angeles, New York, etc. But I am NOT one of those people. I don't know how much more clear I can be with that.
How many owner occupants do you think took advantage of the 30-40% off high point pricing in California and other hot markets? I don't have hard stats to share, but my guess is somewhere in the hundreds of thousands, if not the millions.
Every market condition has winners and losers. Yes, it would be great if we could establish long-range equilibrium with sustained modest growth. I clearly stated that in my post to Jay H. that came before your post. You ignored or glossed over that post, apparently.
If you're going to wear the badge of "Moderator", I kindly suggest that you read the entire thread carefully in the future and also ask for clarification before throwing out accusations that I favor conditions that cause negative events. I am sorry to hear about your neighbor's son and all the others. I did not cause any of that. I did not and do not wish for that. Take your anger elsewhere. It is poorly placed and I reject it utterly. Get pissed at the bankers who made the loans and the liars who had no jobs and no incomes who bid up prices and lied when they failed to pay back according to the terms. Get upset with the Govt that made unwise lending policies. But do NOT get mad at me.
- Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes7y
Every “financial guru” predicts a recession that is always supposed to happen by the next year. And, when it doesn’t happen, they write an article saying “Well the recession got stuck in traffic. It will Be here next year”. Like @Erik W. said “1% of the 1%...” actually predicted the recession. I also agree with @Jay Hinrichs that hoping for one is very one sided. Yeah investors will find great deals, but the average Joe is screwed. People who wish for a recession don’t know what they’re wishing for.
If one does come, have cash reserves and some private lenders who know when opportunity is here. Traditional lenders will not be handing money out like candy on Halloween the way they do now.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Bill Plymouth:
Every “financial guru” predicts a recession that is always supposed to happen by the next year. And, when it doesn’t happen, they write an article saying “Well the recession got stuck in traffic. It will Be here next year”. Like @Erik W. said “1% of the 1%...” actually predicted the recession. I also agree with @Jay Hinrichs that hoping for one is very one sided. Yeah investors will find great deals, but the average Joe is screwed. People who wish for a recession don’t know what they’re wishing for.
If one does come, have cash reserves and some private lenders who know when opportunity is here. Traditional lenders will not be handing money out like candy on Halloween the way they do now.
Exactly only those who were investors in 07 to 2010 understand what happens when credit freezes.. your average basic first time BP investor will be shut out of the market.. they simply wont be able to get a loan.. so if they have cash for sure.. if not.. they just watch from the side lines.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes7y
Originally posted by @Andrei Zamfir:
@Jay Hinrichs
I wish it was not so, but Trump, or any other president, is powerless to stop a recession, especially one that can potentially dwarf the GFC.
He could make it less painful though and let it run its course for a swift resolution, going contrary to Roosevelt’s style in the 30s, which prolonged the Great Depression.
Presidential policy directly affects the economy. The great recession was ultimately caused by reckless lending, which can be directly tied to President Bush's home ownership initiatives (and even Clinton before him). Ironically these initiatives are listed on the White House website as one of his greatest accomplishments.
https://georgewbush-whitehouse.archives.gov/infocus/achievement/chap7.html
These well intention policies had the end result of relaxing lending to the point that people were buying multiple properties with no money down, using stated income versus verified income and letting people with bad financial credit take on loans they couldn't afford. The lending industry is blamed, but it was government relaxing regulations and policies that allowed it to happen.Presidents ultimately create budgets, direct policy and sign bills. Through executive action, they can enact or remove policies which affect business and individuals.
Of course the President has limits to what they can control. Congress enacts legislation. External factors often affect the economy, such as the terrorist attacks of 9/11 adversely affecting our economy or even natural disasters. Many recessions are actually ignited by external factors like that. Still the stability of the economy is very much affected by economic policy, so an external event will just push it over the edge.
The other factor is that cause and effect have a time gap when it comes to economic policy. The policies enacted in the early 2004/5 took several years to become the problem that lead to the crash. My point is policy today affects what happens in a year or years down the road. Some things have a faster effect, like interest rate changes or government cash stimulus.
Although the President can't snap their fingers and affect change, they are guiding the course.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Joe Splitrock:
Originally posted by @Andrei Zamfir:
@Jay Hinrichs
I wish it was not so, but Trump, or any other president, is powerless to stop a recession, especially one that can potentially dwarf the GFC.
He could make it less painful though and let it run its course for a swift resolution, going contrary to Roosevelt’s style in the 30s, which prolonged the Great Depression.
Presidential policy directly affects the economy. The great recession was ultimately caused by reckless lending, which can be directly tied to President Bush's home ownership initiatives (and even Clinton before him). Ironically these initiatives are listed on the White House website as one of his greatest accomplishments.
https://georgewbush-whitehouse.archives.gov/infocus/achievement/chap7.html
These well intention policies had the end result of relaxing lending to the point that people were buying multiple properties with no money down, using stated income versus verified income and letting people with bad financial credit take on loans they couldn't afford. The lending industry is blamed, but it was government relaxing regulations and policies that allowed it to happen.Presidents ultimately create budgets, direct policy and sign bills. Through executive action, they can enact or remove policies which affect business and individuals.
Of course the President has limits to what they can control. Congress enacts legislation. External factors often affect the economy, such as the terrorist attacks of 9/11 adversely affecting our economy or even natural disasters. Many recessions are actually ignited by external factors like that. Still the stability of the economy is very much affected by economic policy, so an external event will just push it over the edge.
The other factor is that cause and effect have a time gap when it comes to economic policy. The policies enacted in the early 2004/5 took several years to become the problem that lead to the crash. My point is policy today affects what happens in a year or years down the road. Some things have a faster effect, like interest rate changes or government cash stimulus.
Although the President can't snap their fingers and affect change, they are guiding the course.
The CRA was put in by Clinton and led to a lot of the sub prime mess which was one of the catalyst .. of course did not help with wall st grading sub prime as the same risk factors as A paper :) but CRA forced banks into known high risk lending situations.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes7y
Originally posted by @Erik W.:
You took my post entirely the wrong way. I am NOT wanting a Recession. I am simply saying one WILL occur. And there are SOME people who benefit from that who are not investors. I would bet you $10,000 right now if we were standing next to each other that there are MANY people right now hoping for a Recession, and I would win that bet, easily. They are the people who would like to buy / rent a home but can't. They have have seen the median home prices climb back up to $600,000 and monthly rents in excess of $3000/month in Los Angeles, New York, etc. But I am NOT one of those people. I don't know how much more clear I can be with that.
How many owner occupants do you think took advantage of the 30-40% off high point pricing in California and other hot markets? I don't have hard stats to share, but my guess is somewhere in the hundreds of thousands, if not the millions.
Every market condition has winners and losers. Yes, it would be great if we could establish long-range equilibrium with sustained modest growth. I clearly stated that in my post to Jay H. that came before your post. You ignored or glossed over that post, apparently.
If you're going to wear the badge of "Moderator", I kindly suggest that you read the entire thread carefully in the future and also ask for clarification before throwing out accusations that I favor conditions that cause negative events. I am sorry to hear about your neighbor's son and all the others. I did not cause any of that. I did not and do not wish for that. Take your anger elsewhere. It is poorly placed and I reject it utterly. Get pissed at the bankers who made the loans and the liars who had no jobs and no incomes who bid up prices and lied when they failed to pay back according to the terms. Get upset with the Govt that made unwise lending policies. But do NOT get mad at me.
I am not angry and I am sorry it came across that way to you. I sure didn't mean to accuse you of causing the financial crisis... I was only trying to point out the repercussions, which far outweigh any house buying opportunity. I agree that many people are rooting for a recession, for varying reasons. Some for political reasons, others for perceived investment advantages or house buying advantages. I understand you are not one of them.
The trouble is for house prices to drop, it will require job loss in the particular market. People waiting for that to happen are assuming they will not be the ones who lose jobs. They are assuming they, their family or friends will not be affected. That is a losing gamble in my opinion.
I agree that a recession is in our future, but I don't think it will be a house buying opportunity. I think the crash of 2008 and subsequent buying opportunity was a once in a life time event. If I am right, that means people are waiting for something that will never happen.
- Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes7y
Hell, I don't want a recession. My business has performed very well due to the strong economy & investors having dollars to spend on income property. That changes & sure, I'll stack my portfolio up with cheap deals.. but I'd only be doing that because my bread and butter revenue source is going to suffer.
I'm seeing so many of these "wait for the recession" posts lately, and it's insane. There is money to be made regardless of the market cycle- if an investor can't make it happen when money is abundant, it's not going to be any easier when properties are cheaper and money is scarce.
- Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes7y
@Jazlynn Gibbs I am 100 percent sure that there might possibly, potentially be a recession or not.
- Member since 2019 · 27 posts · 8 votes7y
People wishing for a recession to "get in on the market while it's down" are idiotic. A recession has tons of unseen consequences that can seriously hurt your investments
- Real Estate Agent · Belmar, NJ · Member since 2017 · 370 posts · 200 votes7y
@Jay Hinrichs
The credit agencies are the real crooks. Lenders are for profit - expecting the highest level of ethics from a for profit institution is naive.
The agencies who gave their “opinion” on credit ratings for securities knowing they were garbage are extremely culpable.
It’s a shame that money hides the truth
- Lewisville, TX · Member since 2015 · 341 posts · 264 votes7y
@Erik Whiting
We need Austrian Economics! That’s why debt & business cycle today are so exaggerated! A depression is coming buy Silver!
- Lewisville, TX · Member since 2015 · 341 posts · 264 votes7y
@Hobie Day
Yes Richards & Rich Dad are great! Austrian Economics!
- Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes7y
@Matt Millard, heh...well maybe. I'm not quite ready to hunker in my bunker with my gold, girls, and guns just yet.
While silver may be at an historically attractive price at the moment (I don't know...not really tracking it closely), I'm not prepared to trade too much for it just yet. If I were to sell even ONE of my cheap little houses, I'd have to find somewhere to put 200 lbs of silver. And find someone who has 200 lbs of silver to sell to me.
That would be just one house. I have a few more than 1. ;-)
Then there's the flip side: once the economy goes back to normal I have to unload all of that heavy metal and redo the real estate investment, which includes transaction costs, hunting deals, etc.
And timing...if I don't time my entry and exit from a commodity such as silver I may lose more money than any gain. The folks who bought silver in 2010 - 2014 are still waiting for it to get back to what they paid for it.
I like houses because they have the advantages of being a hard asset as well as generating income. Silver just sits there and looks pretty sparkling in the sun, sort of like a lazy supermodel, and I don't invest in those.
- Investor · California, CA · Member since 2016 · 367 posts · 375 votes7y
If you really want to get in-depth on the possibility of a recession, watch this:
- 7yNed J.Pro MemberInvestor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votesWe have been on the longest economic boom in history...... ALL great runs come to an end...ALL of them. It will end....not IF....but WHEN...and how HARD. With the record growth ANY slow down is seen as a HUGE shift. Am I wishing for a recession..... NO.... that would be stupid......am I wishing for a sow down/correction?,,,, HELL YES...... for multiple reasons....both political and for the sole reason that as stated above...... when you are record highs, there can be a BIG fall, not just a slow let down..... the bigger you are the harder the fall..... I'd rather have some slow down that continue to sky rocket and fall off a cliff
- Rental Property Investor · Columbus, OH · Member since 2014 · 148 posts · 177 votes7y
Originally posted by @Hobie Day:
The fact that both the 2-year and 10-year treasury yield have inverted helps back this highly probably claim. Real estate will still be a good play, along with a significant cash holding to take advantage of the pullback in the markets
Stating that the yield curve has inverted isn't enough to support the idea that a recession in 2020 is a "highly probable claim." You need to understand why the yield curve has inverted and the underlying causes behind that inversion. I'm seeing a crazy amount of people with little to no knowledge of fixed income talking about the yield curve.
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