Assuming a recession is coming in the next decade or so, which careers in real estate are the most vulnerable? I'll be entering the real world in the next few years and this might influence my career decisions coming out of undergrad
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Brokerage is the most stable by far. Residential brokerage is where you should be if you are seeking stability, especially if your speciality is luxury homes.
Haha.
It might, but it shouldn't until it has to. Do what you want to do. You can't time the market.
To a degree, but the yield curve is pretty fucking scary right now.
https://ycharts.com/indicators/210_year_treasury_yield_spread
"As is clear from the figure, the real yield curve flattened and inverted prior to each of the past three recessions. Consistent with the theory, consumption growth tends to decelerate as the yield curve flattens. This is true even in non-recessionary episodes. In particular, the consumption growth decelerations of 1985-86, 1988-89, and 2006-07 were each associated with or preceded by a flattening or inverted yield curve. Each of the three recessions occurred when consumption was growing at a moderate to low pace."
Everyone knows this now. For the yield curve to cause a recession it means that smart people who are aware that a yield curve causes a recession fail to respond. By smart people I mean the federal reserve. It’s incredibly easy for the fed to steepen the yield since all they need to do is cut rates.
I agree on the yield curve as predictive as it generally indicates the fed has hiked rates higher than the economy can handle but it’s an incredibly easy thing to fix.
+1 SB. No matter what you do, experience on a resume is what will save you in a recession. I graduated into the 2008 recession. It was crazy to see the difference in career results between those who managed to get even a year or two of experience before the recession. Having a blank resume is the killer.
In a downturn, much like investors, employers become risk averse and hire the sure thing. That means experience.
You should be safe at the junior level no matter where you go. The expensive middle management is typically where the major layoffs occur.
Not sure why you got MS, seems like a reasonable question and I wish I had asked it before I went into brokerage straight out of college. Asset management is considered more stable than acquisitions, which is more stable than development, which is more stable than brokerage. I work in LIHTC which seems resistant to some elements of a recession due to increasing and constant demand due largely, in my opinion, to the general squeeze on standard of living by from asset inflation in first tier American cities. That's my two cents.
Back in 2009 I had a land listing fully entitled for about 150 apartments in a desert community in CA. I put it in escrow with a well known LIHTC builder. They couldn't get any credits, lol. Deal fell out. Granted, this was in Beaumont, Ca versus a larger city, but still, anything can happen and I don't expect 2009 to ever be upon us again.
There is a limited supply of credits. That coupled with the fact that major banks are effectively forced to invest makes the industry stable.
I agree with the ranking that Danielplainview has of risk as far as potential employers in real estate. From a risk perspective, asset management seems like the place to be. The risk to that is potentially getting pigeonholed as an asset management person through the rest of your career - it doesn't generally pay as well as positions in acquisition, development, or brokerage.
The exception to this ranking is if you can go work for a well-capitalized family office. Those jobs are pretty sweet, though, and very difficult to get. If you get one, though, no matter what department you're in they will probably keep you on through a recession in order to avoid having to hire a new person on the other side of the recession.
IMHO we're within two years from a recession, based on the yield curve. Could be wrong, but the yield curve has been a leading indicator for quite some time.
I agree with @CRE_entrepreneur that there is a risk of getting stuck in an asset management role at an organization that doesn't offer much upward mobility if your goal is to be an employee most of your life.
There are huge differences between all these jobs, and one is likely to be a better fit than another for your personality and your long term goals, regardless of which one makes you the most money as an employee. My goal is financial independence with passive income, as far away from the rat race as possible so working in asset management 40 hours a week for 10-20 years making very good money before going solo is more attractive to me than working in acquisitions 60 hours a week in a more stressful job making more money with the risk of burning out or being let go during a downturn. Acquiring real estate is a small piece of the puzzle. If your end goal is to raise other people's money then acquisitions and brokerage is for you. I know a Brooklyn developer worth over $20MM who drives a shitty van with his dogs in the back. That's the dream to me. I don't want to wear a suit to work or even have to go to work, I want to work from the beach far from any first tier city. For my goals, it really helps to understand how the business of real estate works, aka how the granular boring things like tax implications and partnership exits and refinancing and construction and lease-up and property management work. That is what asset management is all about. I get to see how the deal really operates and I'm responsible for that operation. I have to do a lot of GP handholding in my job so the developer relies on me for insight and guidance which let's me build expertise in that side of the business.
I'd encourage the OP to think about what lifestyle he wants above and beyond anything else. Like anything, if you don't focus on what makes you happy, it's not going to work out for you anyway.
Best place during a recession? A well-capitalized distressed buyer.
This or working in an REO department at a major bank. Guys I know that got transferred in to help in 08/09 said they learned more in 2-3 years than the rest of their career.
REO?
I'll second this; not because I went through it, but I keep hearing this from those that have.
Downturns are moments of opportunity. Many of the largest real estate fortunes are built during tough times, when the market is spooked and people walk away from solid deals at low basis.
To invert this idea, consider this: The market is hot right now, and in my market people are investing heavily in new and existing Class A apartments even though we are witnessing flat or negative rent growth. I have a lots of friends in investment and development who are churning through deals that have zero chance of performing better than average. It's just where we are in the cycle. They need to do deals to put food on the table, but none of them are going to hit a home run on a new project that gets capitalized at this moment.
It's sad that the American taxpayer could be forced to backstop the GSE losses if this behavior continues to get worse.
Do you know that the GSE’s top loss during the recession was less than $100M for multifamily business? GSE delinquency is 1 bp right now and GSE had virtually zero loss since the recession
And GSE lend very little to class A development
The reality is that most any career can, and will be, impacted by an economic downturn. What you should focus on is making sure that you have marketable, solid skills and that you financially prepare for it. Since you are in school, that means basically crushing your classes so that you have a top end GPA to market when you come out.
I have some good news for you - as a student coming out you can position yourself as a high potential, low cost employee in whatever industry you want - real estate included. That doesn't mean it will be easy, however, it does give you some advantages compared to someone who has a family, makes a decent chunk of money and may or may not be one of the first to get chopped unless they are a massive, massive producer.
Correct. Public Works projects were considered to never end...then they did for over a year in SoCal. There were some, but not many. Even cities weren't spending money. Saw a 70 year old company go south. The owner was a client of mine.
Asset management, not sexy, won't really help build your skills, but the pay is decent and it's recession proof because every building has an owner who needs their investment monitored
I've been on WSO since ~2010. Lurking if not actively posting. The one thing that I have noticed is the increased in RE focused material on the site.
Not complaining - just curious why.
Cause we in a boom baby
Cheers to more 27 YO yuppies living in luxury apartments they can't afford
Well meme'd
Corporate lending, specializing in "at risk accounts" should be pretty busy.
Next decade is a pretty broad time horizon... I would guess more likely in the back half of 2019. Of course, that's just speculation :)
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