What if I Buy Now and the Market Crashes Next Year?

what-if-market-crashesOne of the questions I often get from buyers is, “What if I buy now and the market crashes next year?”

I absolutely understand where buyers are coming from. For most people, their home is their single biggest investment. They want to be sure they’re making the wisest moves.
The question gives me the chance to educate buyers on some of the most important factors that determine the direction of the real estate market.
I touched on these factors in some past blog posts:
  • Denver Real Estate Market Update: September 2017 — This blog asked, “Is it Still a Good Time to Invest in Denver Real Estate?” I looked at trends in housing prices tracked by the Federal Housing Finance Agency. I also talked about important and reassuring changes in the mortgage industry.
  • October 2016 Market Update — In this blog, I predicted that the metro area’s real estate market will level off and even decline over the next four years. I said that our market would cool down a little as other states legalize marijuana. And I wrapped it up by saying you need to have a long-term view of your real estate investment and expect appreciation to slow down. Meaning you may have to hold onto your property for the next 5-8 years in order to make the types of profits we had seen in 2015 and 2016.
Here’s an article from last week titled, “Longest Recovery Ever“. It’s written by two economists with FirstTrust, an investment advisory firm. They look at things like trends in our country’s Gross Domestic Product (GDP), economic policy both here and abroad, interest rates, and politics. Their opinion:
“…we think the odds of going at least another 18 months [in an economic recovery and expansion mode] are very high. Nowhere do we see the kinds of policy shifts or imbalances that could curtail economic growth enough to throw us back in recession.”
When I answer this question for my clients, I tell them I wish I could predict the future but I can’t. All we can do is look at where we’ve been, what’s going on and how will that affect you personally right now. So what if the market crashes next month or next year? You will still need a place to live, right? You will still be building equity by making your mortgage payment. If it’s a housing crash and not a larger overall economic crash, there’s every reason to expect you’ll still have a job. If you do, don’t think about selling. Real estate prices only matter if you have to sell. Over the long term (7+ years), prices do go up. So even if this were the top of this market, just hold on until the next cycle and you’ll still make money.

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