2021 AK real estate peak or getting going?

Question

Hey everyone, You may have seen me reply on here, but I rarely ask questions. For anyone that follows markets closely, it seems pretty clear to me we are approaching a peak in equities. Many people are not holding dollars and hard assets like real estate and commodities are gaining momentum. With a real estate-centric portfolio, what steps are you taking to prepare for a downturn? For me, I'm optimizing cashflow, locking in mortgage rates, decreasing equities, and increasing commodities. Seems a little high-level for Alaska, but I feel we have a lot of room to grow after 6 years in the gutter.

Connor Dunham · Answer

@Chris S. stacking cash. got it. Good luck with your business venture.

@Allen S. I've read the opposite - Cash is trash (especially when the FED goes Burrrr). I am optimistic for Alaska. Net migration is a function of the job market in Alaska compared to the lower 48; we run inverse to the lower 48 in that way. So, you can speculate that this trend will reverse when the lower 48 job market cools off. Another secular shift (which we are seeing) is the rise of remote work. Plenty of people who work in the tech sector are now free to roam. Alaska is not a wide spot in the road or air, but a destination. I expect longer-term furnished to do really well over the next decade for our market. I'm not so much worried about price. It is a function of average/median income for our market and interest rates nationally. I don't expect income to fall for our market, so the only factor of large concern is borrowing rates. I do expect prices to level off or decline as rates go up. We're still relatively cheap compared to the rest of the Westcoast, so I don't expect there to be a huge downside risk.

Allen S. · Answer

@Connor Dunham - You make valid points and it's never wise to underestimate the FED.  As much as we may lament their macroeconomic policies.  That being said, I'm not terribly fond of acquiring max debt at any point in time.  Which is as much a risk-limiting decision as it is a yield-seeking decision.  I do think that there will be pockets of opportunity in AK, but we won't see the boom that every southern state will see.  We will benefit from a few Tech remote workers, but not likely enough to offset the tides of jobs that are driven by the oil industry.

Allen S. · Answer

@Connor Dunham - Cash is king my friend!!  I am in the max savings camp with @Chris S.

It sounds like you are a bit more optimistic than I am on the overall economic trends in AK.   While 6 years of flat-line may seem like it's ready for a rebound, that rebound has to be fueled by something.  The biggest metric that makes me think that real-estate is not going to boom is that we are experiencing a net outflow in migration, and real estate is a demographically driven market segment.  I do still think that there are good investments to be made, but I do not think that the 2020 bump will continue, and I think that home prices in general will regress back to the mean, which might be a slight decrease in prices.

Chris S. · Answer

Currently hoarding cash and looking in to a syndication with a few friends for a big apartment complex while rates are so low. I have been trading a bit on the stock market too, albeit not super successfully haha.

That and starting off my PM company and expanding. That's my biggest project currently.