It’s hard to tell nowadays which end is up. One day we’re headed towards economic Armageddon and the next day we hear of steady growth and inflation threats. It’s enough to give you whiplash, to be sure. Instead of becoming one of the many prognosticators of what’s to come, we’d rather help you think out your own strategy and make sure it’s aligned with your beliefs:
If you believe in a double dip scenario, this means that you expect GDP growth to be negative and the economy to shrink. Rates should continue being low for two some years, and we can expect deflationary pressure on real estate prices. Although the job picture would be highly uncertain, rents would continue to climb higher due to increasing renting demand from the growing renter pool.
- RENTERS: reassess your rental scenario. Are you currently stretched? Particularly if rents go up 20% and concessions are gone, you will need to either downsize or buy within your means. If you are not stretched and got yourself a rental deal in 2009 with minimal annual rent increases, then stay put and thank your lucky stars.
- BUYERS: current at-market-price apartments are not pricing in a double dip recession. Sellers have not adjusted for this would-be reality right now. Wait for 3 – 6 months to pound the pavement and allow for prices to adjust. Rates will continue to be low so you should still be able to benefit from them.
- SELLERS: sell now and price properly. The optimal timing for you would be to sell, then rent an apartment for the 6 months that it will take for prices to adjust to the new reality so you’re not pressured. You would thus be selling high and buying lower; what more could you ask for?
If you believe we will avoid another recession, you likely believe that growth will be up but slow. It’s questionable on how long rates would stay low under this scenario. What’s more certain is that real estate prices would see flat to low single digit growth over the next 12 months, against a backdrop of an improving job picture.
- RENTERS: the rental market growing at a faster clip than are housing prices – reconsider your renting position and see what’s within your reach to buy. It may surprise you.
- BUYERS: this means higher rates are not too far down the road. You know the worst is behind you and therefore you could buy now for your needs 2-3 years down the road (not too much further). That way you don’t find yourself in the position of needing to upgrade so soon after your purchase and pay more for it.
- SELLERS: if you are very bullish, you may want to rent your place out now to take advantage of hot market and sell 2 years down road when prices will have appreciated. Another option is upgrading now rather than later, as prices are likely to go up along with interest rates.
So, which camp are you in? Inquiring minds want to know!