With fears of a recession getting stronger, many investors are moving into “safe” mode – in a multitude of cases, to avoid wiping out much (or all) of their portfolios and seeing a “repeat” of the Great Recession of 2008.
Lately, the pace of runaway inflation has been pushing interest rates (and in turn, mortgage rates) sharply upward, bringing the Freddie Mac fixed rate for a 30-year home loan to more than 5.5% as of mid-July (2022).
Meanwhile, nobody knows what to anticipate from the stock market, given its regular 3- and even 4-point swings in either – or both – direction…sometimes even on the same day! According to research from realtor.com, the monthly mortgage payment of a median-priced home is now at approximately $2,000. This compares to $1,300 per month just one year ago.
Given that, does owning and/or investing in real estate make sense during a recession?
If you go by past results, the answer could be yes…and there are several good reasons. First, over the past 60 years, real estate values have continued to go up, despite a number of recessions.
Also, the price and value of real estate doesn’t fluctuate – up or down – nearly as fast as the value of stocks. In fact, real estate is oftentimes considered to be a hedge against stock market volatility.
Owning residential rental real estate during a recession can be particularly beneficial for investors, because as homeownership rates often take a dip during these times, more people become renters…and they need properties to live in.
If you are currently a rental homeowner – or you soon plan to be – in the Central Florida area, and you’d like assistance with managing and maintaining your investment(s), give us a call and we will be happy to fill you in on the many benefits of working with an experienced, local property management team.
Freddie Mac – Mortgage Rates Rise as Surging Inflation Heightens Recession Fears. By George Ratiu. July 14, 2022. Realtor.com. https://www.realtor.com/research/freddie-mac-mortgage-rates-july-14-2022/
3 Reasons to Invest in Real Estate During a Recession. By Remen Okoruwa. May 2022. BiggerPockets. https://www.biggerpockets.com/blog/reasons-to-invest-in-real-estate-recession