Macro economic risks in real estate investing

[Ryan Hamaker]

Hi fellow BP members,

I’d like to get everyone’s opinions on the current macro economic risks that may affect real estate investing over the next 2 years.  Specifically, I’m referring to the fact the some larger, more pricey areas on the west coast, seem to be experiencing a pullback in the housing prices.  In my local investing area here in Florida, many local real estate agents are seeing a slowdown in housing sales both in listings and active buyers.  The yield curve continues to be inverted implying a recession in the next 6-18 months.

My question is more for long term rental investors.  Are you continuing to purchase additional rentals if the numbers make sense despite the risk of the asset losing considerable value if a recession comes to fruition or if our current real estate cycle retracts.   I’ve heard arguments on each side with prominent BP contributors jumping passionately on one side of the argument or other.   

Are you buying more rentals in this market if the numbers make sense.  Are you waiting for a big downturn to buy more at a significant discount?  Are you selling your rentals now to have significant capital to deploy later. 

Thoughts?

[Michael Glaspie]

I am studying strategic economics in my MBA program currently. I am by no means an extremely savvy economist. However, I have seen that economics is a much broader concept that we believe it to be. The macroeconomics state is impacted by international markets across all industries. To look at the real estate market as a whole would still be just a minor fraction of the global economic picture. 

My point is I think that it is incredibly hard to predict what the housing market will do and how long it will last. I agree with @Michael Ealy, that if you are in the buy and hold game you will outlive many market cycles. If you are buying one and two projects a year I don't think an overhaul of underwriting is necessary. If you are turning out large projects with hard money, then margins might become more relevant. 

I don't know if I answered your question or not, but I hope I provided some insight.