SPX vs Home SFR Price during the 2008 crash

[Jason Y.]

Hi BP Family,

I'm seeing posts of uncertainty during these recent times in regards to COVID-19. I've seen questions such as:

• Whether you should back out of your current deal.
• If you should wait for housing prices to come down before you invest.
• If you should sell your investments now before prices drop.

Though I can't provide answers to your questions directly, I can provide data from our last crash in 2008-2009 that will hopefully guide you as you make your investment decisions.  Now historical data can never predict the future, but given that the last crash of 2008-2009 is said to have been caused by the subprime mortgage crisis and if we assume that what the real estate market went through in 2008-2009 is a worst-case scenario, then we can use historical data to set a baseline of what's to come in the future.

Below is a graph of the average SPX closing price VS the average SFR Home price for the top 5 states by GDP(CA, TX, NY, FL, IL). The left Y-axis is AVG SPX(green) and the right Y-axis is Avg SFR Home Price(blue). The X-axis is a time series in years. All data is aggregated to the year.

We can see that housing prices did not bottom until early 2012, 3 years after the SPX bottomed in 2009. Though home prices initially fell along with SPX, Real Estate lagged behind the stock market before hitting bottom and this provides time for us to either get in or out.  Also, given that the RE market was not a catalyst for the recent stock market crash, this should provide more time for us to make our RE investment decisions.

I hope this insight provides value to your investment decisions. Please feel free to let me know if you want to dive deeper into any data such as rental data down to the county level.