Housing Market Set For Biggest Downturn Since 2007
Houses OverPriced By 20-40%
Have you seen any Real Estate headlines like this lately? Depressing isn’t it, well don’t worry if you either check the next days paper or find another one you’ll find headlines like this.
Housing Market Booming
New Home Construction Set For Record Growth
I’ve even run into similar headlines to this on the same page, one calling for a downturn, the other calling for a boom and that’s the problem with much of the media these days. They have an agenda.
While they may have different underlying agendas, their main one is to sell papers and headlines that scare people or pump them up sell papers, magazines and TV news which is why you have to take them with a grain of salt.
How many economists, politicians, billionaires and people in general nailed the financial crisis back in 2007? Just a handful.
How many of those had accurate forecasts before that? Just a handful again.
And how many have been 100% right all the time, if you guessed zero you’re right.
Many of them have just picked a stance and stood fast on it until they were right. In the early 2000’s there were many vocal critics of the housing booms forecasting an imminent crash and for five years plus they held to that and sure enough they were completely correct. Eventually.
Meanwhile the landlords and homeowners who bought at the beginning of the growth were still far ahead. Yet, if they followed some of the headlines and listened to these media experts, they would have missed out.
Now I’m not saying you can’t listen to what’s out there, but you can’t take the headlines verbatim. You need to get more of the facts and look further into the details. There are so many variables that affect housing, the world economy and even the cost of groceries that it’s almost impossible to predict with complete accuracy anything these days.
An unexpected frost can cause orange juice prices to skyrocket, a dock strike can leave fruit hanging in the orchards causing shortages two months down the line, a country dealing with debt can change the confidence of a whole continent and these affects trickle down throughout our very interconnected world.
So you need to stay informed, but try not to let the media headlines cause a panic in your life. The panic of the up and down swings will give you an ulcer or worse a heart attack and it’s just not worth it.
As I told another Real Estate investor a day ago, you have to look long term. The panic headlines today are laughable ten years down the road when you look back at all the cash flow you’ve generated, the amount of your mortgage that was paid down by your tenants and the current value of your investment.
As we’ve talked about before, Real Estate is a long term plan and a long term solution. If you have planned for the long term the day to day and year to year hiccups all even out over time. Having said that though, if you’re getting to a point in time where you are selling everything off to simply enjoy retirement it may be more important to pay attention to the current market.
Just remember not to get caught up in the headlines and look at the actual details usually buried in the article!
Hi Bill, Hi Glen,
You both got it spot on. I was living in the UK during the late 90s and early 00s when the media were obsessing over when the housing bubble was set to burst – just like the coverage over here right now. One recession and 10 years later and it hasn’t burst yet – national UK house prices are currently at all time highs.
The best purchase price of a rental I was able to negotiate was in Edmonton in May 2009, when noone else was buying since the market was, according to all the frenzy at the time of the last recession, set to tank for forever and a day. I was able to negitiate over 10% off the asking price which had itself already been reduced once before. Looking back it was a great buying opportunity. My only regret is that I didn’t pick up more than 1 property at the time. As they say, its not timing the market that’s critical. Its time in the market.
Cheers,
Jan
Thanks Jan,
Love that last line of yours, well said!
Bill
Thanks Bill,
If I had listened to the media over the years I’d never had done anything or have anything. If you persevere when times are tough you’ll be instoppable when times are good. We have to take the good with the bad. I do appreciate the thoughts and encouragement of like-minded people.
Cheers, Willis 18 years as a Landlord.
Great comment Willis!
It is so true. Tough times turn you into a survivor and help you prosper even more during good times. Landlords who’ve only seen good times tend to quit when things turn bad, yet perseverance is the biggest reward for landlords, especially over time.
thanks for the comment,
Bill
Bill,
Good article. I feel good about the 3 rental properties that I bought in 2012 and 2013 here in Edmonton. I was planning for the long term hold, so I am not too concerned about the hysterical media coverage. If housing values actually drop 10 to 20 percent in the next year, if we really end up having a recession here in Alberta, I will be ready to buy a few more. In the meantime, 2 out 3 of the rentals are stabilized and getting good cashflow. The third one is getting stabilized with a good tenant who is renewing his lease for another year. A few minor maintenance issues need to be looked at this year, and it will be smooth sailing for the next year or two.
With all the mixed signals from the media, I would think it would be very difficult for new investors to decide if real estate is an investment opportunity that they should get into at this time. I do feel very thankful that I got into this business a few years ago, before the fear and mixed messages starting ramping up. Having a couple of years of experience really helps with developing a thick skin to withstand the “sky is falling” chicken littles that are out there right now.
Thanks,
Glen
Hi Glen,
I know another investor who frequents this site who also bought during the last downturn. All of his properties cash flowed when things were bad and when they turned good he cash flowed even better. His plan is also long term and he just looks at this current downturn as another buying opportunity.
Don’t buy when everyone else is buying, that’s when you need to sell, then when everyone else is selling it’s time for you to buy again! It’s part of the buy low sell hi theory!
Regards,
Bill