Are Home Prices Falling – What Does This Mean For Investors?

Are Home Prices Falling – What Does This Mean For Investors?

Leverage Lending Group
Leverage Lending Group
Published on November 29, 2022

Are Home Prices Falling – What Does This Mean For Investors?

If the Housing Crisis of 2008 keeps circling in your mind, given the latest state of affairs in the real estate industry, you aren't alone.

Most investors fear the worst. They remember the wipeout the housing crisis did, and they're bracing for the worst.

This time is different.

Are home prices falling?

Yes, in many areas, but not all. However, they aren't falling at rates even close to 2008, and other factors were going on then.

What's Different About this Crisis?

This crisis doesn't involve predatory lending issues. Yes, interest rates are much higher, and house prices are absurdly high because of the rapid increase over the last year, but that's about it.

There isn't an influx of no income, no asset loans, or interest-only loans leaving homeowners with loans they can't afford and home values that don't support them.

Most loans taken out today are fixed-rate loans that are thoroughly vetted. Lenders ensure beyond a reasonable doubt that everyone can afford the loans and that they aren't lending just to lend.

Plus, housing prices are much higher. This means homeowners have much more equity today. So if prices do fall, they aren't going to fall to the point that homeowners are upside down again.

What about Investors?

Investors are in a good spot right now, even if home prices fall. Inflation directly affected rent prices, meaning investors are earning more now than before.

Will equity decrease?

It might, but not to the point that anyone owes more than they owe. Plus, with higher rental income, investors still have a higher bottom line. If they hold onto the properties for the long-term, values will rebound eventually, so there isn't a risk of a tremendous loss.

Lower Prices Means more Affordability

Lower prices may allow investors to increase their real estate portfolio even further. With the sky-high prices we saw last year, many investors were priced out of the market.

Investors with enough home equity to use for a large down payment on another home could be in a great position to add to their portfolio and have more income.

Should Investors Worry?

There's always a chance for loss in any investment. Is the risk higher with home prices falling/

Not necessarily. The key is to diversify your portfolio, whether you invest in different real estate markets or put some capital in real estate and invest in other assets too.

Final Thoughts

There's no guarantee investors will make money in any industry, but real estate is a hedge against inflation and could work for investors rather than against them.

The housing crisis of 2008 isn't going to see a repeat, at least any time soon. We've seen many cycles in real estate, but the most recent crisis is at the top of everyone's mind. So, for now, prices may fall, and rates may increase, but overall real estate investors are in a good position.

Leverage Lending Group
Leverage Lending Group
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