*Investors, Brokers, Lenders, Agents* - RECESSION THOUGHTS?!?

Question

Bigger Pockets Community - what are your thoughts on the housing markets as it relates to todays now confirmed recession. Investors, how is this changing your strategy? Brokers, Lenders, and Agents - how do you see this affecting the markets in which you operate in??

Would love to get any and all thoughts on this!

Zach Wain · Answer

@Tyler Solomon - the only recession in recent history that has also seen a drop in home prices was the 2008 great recession, but that was a housing bubble that caused the recession.  Not the other way around.  Unemployment is still super low, but typically unemployment starts to increase as GDP decreases, there is some lag time there.  So even the smartest experts can not be 100% dialed in with how bad of a recession it will be.

Recessions are a necessary rebalancing time, we can not go up and up in a straight line forever.  Me personally - I think we are in a very mild recession and I think unemployment will increase slightly, but I think our economy is strongly positioned to handle a small recession.  I am more concerned about what future growth looks like in the next 2-10 years.  The home affordability index is shifting higher and higher, wages have grown a bunch but need to slow down so inflation does not get out of control again.

There are a lot of things the Fed has to consider when making its policies.

Last random thought, but this matter - its in the US's best interest to keep our Treasury rates as low as possible so out debt payments do not get out of control.  We have to grow out of our debt.  That is not in the Federal Reserves mandate to control, but it has to be a factor at play.  The Fed needs to spur growth with mild inflation, and keep our Treasury rates low.  That is a tough act to balance!

Alexander Heinrich · Answer

Hi Tyler, great question. From a lending perspective, I think we are going to see the housing market continue to rise the majority of my clients are real estate investors and they are buying like crazy! Even if the primary home buyer is being priced out, smart investors know rents are rising at a rapid pace so these folks will pay above market value if they need to and if the numbers still work.

J. Mitchell Bernier · Answer

@Tyler Solomon I do think we are heading for a defined recession and are most likely in one now. As an investor, we are being very strict on our due diligence and not cutting any corners regarding inspections and running our numbers. I have a property under contract now that last year would have been no brainer, now we will likely have to pass on it because of rates being higher and uncertainty regarding higher rents.

As a lender, we are being much more conservative and being strict on our post closing liquidity. We are starting to look at deals where they have 9-12 months worth of reserves compared to 3-6 months before. Interesting times for sure.

Hope this helps

Investors, Brokers, Lenders, Agents - RECESSION THOUGHTS?!?

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