Fear in the Market: Founded or Unfounded?
When I write these articles, I do so with the intent of starting a conversation. I write to be thought provoking and to start a discussion. This article is no different. I believe any decision regarding real estate should be done after discussions with a great team of advisors like a CPA, Attorney, Lenders, Brokers, or other knowledgeable individuals.
It’s clear throughout history that real estate is cyclical and for the past several years, we have been on a strong uptick with an exceptional real estate market. I’ve been in this business for 25 years and though I have seen strong markets before (think 2004-2006) but I’ve witnessed nothing like what we have had over the last several years. Prior to COVID-19, we started discussions in the office of a possible “shift” in the market. Certainly, when COVID-19 started, it had to be the trigger to push things into a shift, right? It had just the opposite in the residential real estate market. That market just continued to flourish and boom. Residential Investments like multi-family properties and single-family investments have joined in that increase and have continued to boom. Granted, some markets felt the affects of the pandemic like office space and office buildings, but overall, the vibrant real estate market continued. We currently have unprecedented demand for single family housing, investment grade products like leased commercial, mixed use, and multi family properties. How much longer can this continue?
The question is, if real estate is cyclical, are we still going up or are we at the peak? Where can the market go from here? What does the future hold? These are all great questions and short of breaking out my crystal ball, all questions I really can’t answer.
I’ve always believed that trying to time any market is a fool’s game. I also believe in the adage, “don’t wait to buy real estate, buy real estate and wait!” The decision about buying or selling in this market is a HIGHLY individual one and a decision best done with discussions around future goals and ambitions. I have several clients that are selling now but it isn’t for fear of the market going down but it is based upon their personal quality of life or personal timing (like age, desire to travel more, etc.). I’ve got several clients ready to deploy cash and buy in this market for the long term with the idea of holding the assets they buy for 5-10 years or more. If you are looking to purchase a home in this market, it’s a great time to buy…rates are still incredibly low and the joys of homeownership far out way the rental market.
While issues like a global pandemic, rising inflation, changes to the stock market, or global issues like currently being faced in Ukraine, do unfortunately exist and likely cause a very real impact personally, the real estate market has always been a foundational opportunity for the U.S. More self-made millionaires exist from real estate as a tool than any other source.
Will the market go up over time, absolutely! Will it go down soon…who knows? We have never been in an environment like we are now. Look at the costs of construction vs. the costs of a building already existing. Compare those two values and tell me if we can go down or if we will continue to rise. We have never experienced a situation like the last several years of “quantitative easement” and trillions of dollars being poured into a now GLOBAL economy.
What do I think? I think the savvy individual tunes out the noise and doesn’t worry about fear. I think only those that are truly “selling” an individual are using fear or hype to trigger emotions. Did you know the fear of loss is a greater motivator than the idea of gain? I think we need to tune out the noise and gain advice from our advisors for what our personal goals are.
This is what I think-
Buy…buy and hold…buy and wait to see your values rise and your net worth grow. Buy that home. Buy that 2 unit or 6 unit. Buy that investment property. Invest in this real estate market.
Sell…sell if that is what is best for you. Sell if you wish to gain that capital from the investment in the next 1-5 years. Sell your home and upsize, downsize or buy that second home. Sell that land you have held onto for decades. Sell, it’s an incredibly strong market and buyers are buying.
Just don’t sit around and do nothing and watch this opportunity pass you by. Start your conversation with an advisor you trust today.
Kevin Fletcher, CCIM
