Recession good or bad for real estate?

I wanted to share a couple graphs I have used for my own personal investing strategy when it comes to real estate.  And if you have been following our real estate journey for the past 2 decades you'll see a common theme: "Time in market" is more important than trying to Time the market (which is not possible).  We bought our 1st house (Everett) in 2006 and saw our property values go up 20% in 1 year!!, and then saw it go down in 2007 by 30%!  It took about 10 years for the real estate market to recover but we were able to sell for a profit. The longer "time in market" the better chance of realizing a profit and weathering any ups & downs.  Let me share a little more about our real estate journey.

We bought our 2nd house (Magnolia) in 2011 and saw the value double in 5 years.  We sold that house in 2016 and with the proceeds bought a new construction house (Lynnwood) AND a beach cabin (Camano).  After 5 years and at the start of Covid we sold the Lynnwood house in 2021 for double what we paid for it and made the move out to Camano full-time (and also bought the Camano Shop).  I was telling everyone in 2021 to "Cash out" because I saw there was a unique opportunity for sellers!!  Houses were selling for 20-40% above the List price with multiple offers. During Covid (March 2020- March 2023) we saw home values appreciate 30%!! ... I also had a feeling that 3% interest rates were going to disappear so we went on an acquisition phase during Covid, we liquidated our Amazon stock holdings, and bought 6 properties: 5 rentals + The Camano Shop.

Perspective is everything! Having attended over 50 real estate conferences all over the country since 2012 in different cities, speaking to other real estate agents about their markets, and tagging along with Melissa during her Fashion Designer years to Hong Kong, Los Angeles, San Francisco, New York, I saw how expensive real estate in those cities were and that helped me realize that home values in the Northwest were "cheap" relatively speaking.

My Real Estate Philosophy can be summed up in these following slides:

I attend an annual conference every year offered thru my brokerage Keller Williams Realty called "Family Reunion" and our CEO Gary Keller always goes thru this Vision Slides outlining the U.S. Real Estate Market. The slides below make up the foundation of what I use for my own personal real estate investing, and what I share with my clients.  These slides also lay the foundation for when I tell buyers "It's always a great time to buy", going back to our core belief about the importance of "Time in market". Our latest acquisition of the Old Silvana Schoolhouse is another example. We had to pay $100K over the listing price to beat out 6 other buyers, but in our minds we were thinking what is the value of this property 10 years from now?  Easily over $1M.  Real estate is one of the best wealth-building strategies especially if you combine it with a business.  I always tell Melissa we can open up a business, as long as we own the real estate underneath it.  I highly recommend watching the movie about McDonalds to understand the significance of that. 

HOME PRICES! When I first saw this slide back in 2012 at my first KW real estate conference, something clicked in my head and I realized real estate is one of the best long term investments. This simple slide validated the concept of "Time in Market" - the longer you own your house(s), the more likely the value will have increased.  Have you ever met an 80 year old homeowner that regretted buying their house 30/40 years ago?  That is especially True looking at my 1st house purchase back in 2006. If we wanted to sell in 2010 the value of that house was negative 10-20% what we paid! But in 2016 it was "even", and in 2023 it was double the value we paid in 2006.  Time in market can be a very powerful tool.  You might have heard us talk about getting on the real estate "escalator" sooner versus later, since home values are continuing to go up and up every year, and at some point you may not be able to afford a house in the neighborhood you want. I have a great story to share about the last $500K house in Bothell which I helped our good friend purchase in 2017, which is now worth over $1M (that is over $500K in equity!). That's why I love my job, since I can help 1st time homebuyers build generational weath and/or have $ for retirement.  

ANNUAL APPRECIATION: What's interesting to note is there are only 4 years where home values did not go up. That's why most economists (and myself) say real estate is a great long-term investment. 

INTEREST RATES: Buyers are always complaining about the high interest rates and that is understandable given the high prices now (vs 5-10 years ago), affordability is a challenge for many now. Some of our parents /grandparents bought homes back in the 1980s at 16% rates so it's all about perspective. The historic average is around 7% which is where we are now, so that is not necessarily a bad number.  Most of the lenders I speak to and experts I follow think rates will come down to low 6s / high 5s in the next 2 years, so for Buyers there could be an opportunity to finance later. Ask me or your lender about the 2-1 Buydown option (most Sellers are willing to pay for this benefit for the Buyer), there is even a 3-2-1 Buydown option (you get a lower % rate when you buy your house which means a lower monthly payment, so you can qualify for more).

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Does a RECESSION cause home values to go down or up?  Does a recession cause interest rates to go up or down?  This might be surprising for many, but here is the historical data:

We have data & information that is hyper-local for your specific city or neighborhood, which may differ from the national data.  As most of you know, our business is 90% referral-based, meaning we take awesome care of our clients so they refer us to their friends, family and co-workers. And the way we do that is by giving great advice, providing data, charts & graphs, and expert opinion based on our experiences as real estate agents, investors and business owners.  Let's connect