Opinion: A good time to invest in Metro Detroit real estate
A long-held financial philosophy has been that real estate is a solid and relatively safe investment. For decades people operated under that belief, until the Great Recession began in 2008 and so many of us were badly burned.
Millennials and baby boomers may feel like the Great Recession was just yesterday, which can make it difficult to stay calm as we continue to hear cautionary messages about a 2020 recession looming. In fact, I’d argue we may be in a recession as we speak. Even though unemployment is low and consumer spending is high, other indicators we’re seeing — like the recurring yield curve inversion and the GDP slowing — are likely to be the markers we’ll look back on as having been the beginning.
Rather than prepare for the worst, we should consider an alternate view: A recession may offer renewed opportunity to invest in our futures.
Because of the collective trauma experienced during the 2008 recession and housing bubble burst, many Michigan residents are nervous about a future recession and are already behaving more conservatively than normal when it comes to investing in real estate. This is exactly the opposite of what we should be doing, if we have the means.
Historically, the housing industry has fared well in recessions (only twice in the last five recessions — 1990 and 2008 — did home prices come down), and in the aftermath of 2008, tighter restrictions have been put in place to qualify for a mortgage.
A coming recession may be a great time for Michigan residents to invest in real estate, and there are several reasons:
● The obvious: Interest rates will be down
● Less people will move during a recession, which will keep inventory low and demand higher
● Home prices are likely to drop slightly, so those who are buying will get more for their money
● Though a slowdown in home sales will happen initially, I predict that overall we’ll see equity growth
● The Metro Detroit housing market has not seen massive inflation with the economic recovery like other cities including New York and Miami, meaning the housing market in metro Detroit will remain healthier during a recession than other areas.
These days, Metro Detroit is not as dependent on the auto industry — more residents are working in medical and health care industries, cybersecurity, information technology and agribusiness. That diversification will help the housing market fare better this time around.
Real estate investors understand these conditions. They know a recession can be a good time to buy, and you can bet they’re already planning on investing. Due in part to their investments, the rest of us can be assured that the housing market will rebound from a recession more quickly than other sectors.
What about those of us who are not real estate investors? There is room for us to fare well during the coming recession, too. If you’ve been squirreling away extra funds in anticipation of a recession, I urge you to weigh your options and consider a bit of risk. Most people will be too fearful and unwilling to invest in real estate, although real estate historically has performed much better during these times. If you have the resources, consider dipping your toe into real estate investment waters.
I leave homebuyers with one message: Don’t let the past haunt you. The devastation of 2008 is not looming in front of us. We should choose to see this as potential for opportunity and use this time to think strategically about investing in our futures.
Paul Apostolakis is co-founder of Omega Lending, based in Royal Oak. He has over 15 years of experience in the mortgage industry.