RE Industry During Downturns
This is a really dumb question, but can someone tell me what’s wrong with the following logic:
Aren’t recessions a good thing for the real estate industry? It seems like (in general / from a macro perspective) everything is very overvalued right now. With a recession, wouldn’t there be a correction in prices? With that correction comes more opportunity. In that sense, does hiring increase during times that the economy is in a recession?
I am currently a sophomore and I’m terrified of being unemployed when everything comes down. I’m just grasping at straws at this point, but I figured it may make an interesting discussion.
I lived through the '08 downturn, which is not a "typical" downturn and was very severe for RE. What happens is that deals fail, banks fail (or at least stop lending to RE), and system just stops. Lots of jobs lost in RE and finance and hiring was basically nothing in many markets. Many people who graduated in 09/10 had to basically work internships for years (I knew several people who did). Lot's of BKs (personal and business). I even knew a few people personally who committed suicide after going down. That's the downside.
The upside comes with the recovery, which will occur assuming the world keep running. Firms with capital can win and get deals, it can a be a great time to start. This is because all the entrenched players are stuck with their "legacy" assets. Big gains can be made for sure.
It's all a matter of perspective as to good or bad. I won't dwell on my personal story, but it ended up being very good for me (sucked at the time, made very little money those years). Everyone I knew who stayed and fought it, or even started in it, are doing well. Still, there are people who left and never came back. I still see a guy who was a mortgage broker working as a server at a very high end steakhouse, I think he may do resi mortgages on the side now but not full time (FYI, a server at this place may get close to six figures with tips, not worst job in the world).
Personal advice, don't go into debt, incur massive expenses, or other dumb shit. If you can build liquid reserves (cash) you can be very well positioned in any cycle. You also sleep better at night!