Here's how to sleep at night during a market downturn.
Inflation is higher than it's been in decades, signs of more supply chain problems to come are increasing, and the stock market is down over 20% on the year. It's looking like we may be close to a recession, but that doesn't mean you should panic.
RECESSION-PROOF ASSET CLASS
Many would-be single-family homeowners are opting to rent, driving up demand for multifamily properties. Moody’s Analytics found the average single-family home is 43.7% more expensive than it was in 2019, which in turn is driving increased demand for multifamily units.
Other factors supporting this statement include,
There is a low supply of affordable housing and apartments nationwide.
There is a high demand for apartments and communal living from millennials, seniors, and immigrants
There has been a disruption in the supply chain for the last two years, which has led to an additional shortage of inventory in the residential living segment.
Everyone needs a place to sleep.
Downsizing from homes to apartments is common during a recession.
Prices are at an all-time high and outpricing many home buyers.
The presence of too much liquidity (cash) in the market together with low-interest rates guarantees high home prices for the next 2-3 years.
To lose tenants or “not create income”, there would need to be an oversupply of apartments and experience a trend of lowering rents as owners compete with one another. This is not, nor will it be, the case during a recession when the supply of available homes is already undersupplied, and people are downsizing from larger homes or luxury-style living.
Even if apartment investors take advantage of this, astute investors can further shield their investments from a future recession by choosing well-placed assets in thriving markets such as Florida, Texas, Arizona, the Carolinas, etc.
So is multifamily real estate recession-proof? I would say so, so as long as the asset is selected correctly and located in a well-rounded thriving market!
The New Era Podcast, "The Apartment Investor", is set to launch on Monday, November 7th!
More details to come.
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