Hindsight Is 2020: What To Learn From The Last Decade In Real Estate
By Fuquan Bilal
Hindsight is always 20/20. Now looking back over the past decade, everything that has happened in real estate is pretty obvious. What can we take from it as we move into 2020 and the next decade?
Market Recap: 2009-2019
Even though some cities were already being hit hard by the Great Recession and housing crisis by 2005, some didn’t feel it, and it wasn’t publicly admitted until 2008. Some places still didn’t really see all of the foreclosures coming through the pipe until 2011 due to long processing times and banks trying to hide this shadow inventory and their losses. Later years of back data, including three years worth from the National Association of Realtors, would show just how bad things were.
Yet, by 2011, some markets were already turning around again. That also took some time to roll out around the country.
Few people were spared during 2008. It not only rocked people financially but mentally as well. Today, maybe 10% or fewer of those in real estate were in the business prior to 2008.
The Last Real Estate Boom
So, from 2011 until 2018 we saw a fresh boom in the US real estate market. This follows the historical pattern of phases of the market running an average of 7 to 15 years.
The big funds definitely helped fuel the fire by buying up huge pools of single family rental properties. Mortgage lenders shifted to making money easier to get for real estate investors than for regular home buyers. The regulations that created this environment really haven’t changed much. Although we have seen the FHA and government agencies begin to back away from their own subprime style loans in the last couple of years, meaning those with virtually no down payments, easy income underwriting and low credit scores.
The experienced and creative investors found ways to acquire assets at great discounts, and have done it at great scale.
However, over the past few years we’ve also seen a whole new wave of brand new Realtors, TV personalities and investors jump into the game. They’ve kept bidding up asset prices, and inventory has become increasingly more challenging to get. At least at numbers which really make sense. We’ve seen the markets that burst the worst in 2008 once again double or triple in prices.
We’ve had rumors of a new recession and warnings the stock market has been at least 60% over priced for years. Most investors seem to have become totally numb to these warnings though.
The Current Landscape
As a whole the economy has been very strong. Yet, we’ve also seen some massive IPOs that have failed terribly, and more concerns about tech companies that are losing billions of dollars. Upwork, WeWork, and Uber are just some of them. The recent exit of Google’s cofounders has also raised some eyebrows.
The retail home market appears to have already hit a new plateau in some markets. Rents and retail house prices are just unaffordable, except for speculative flippers in many markets. Even the biggest luxury brands have been ditching Manhattan’s famous retail rows. There are double digit negative trends out there in some niches and submarkets.
On the upside there are still some affordable cities and channels for obtaining discounts, but investors have to look for them.
There is still a huge appetite for US mortgage debt from around the world, to the tune of tens and hundreds of billions of dollars.
The Next Decade
It’s logical to expect the next decade to be much like the last one. At some point there will need to be some type of correction. Then there will be a surge in acquiring distressed assets again.
There are opportunities to cash out, buy right, hold and make great returns in real estate. Providing investors invest by the numbers, and don’t fool themselves by buying into the hype.
Some people will always make money. You just may have to be more disciplined and creative over the next five years than during the past five years.
Investment Opportunities
Find out more about investing in secured debt and real estate, go to NNG Capital Fund
Fuquan Bilal
Fuquan Bilal founded NNG in 2012 with the principal mission of capitalizing on the growing supply of mortgage notes in the interbank marketplace. Mr .Bilal utilizes his 17 years of residential and commercial real estate success to identify real estate opportunities and capitalize on them. To date, he has successfully managed three private mortgage note funds that primarily invest in singlefamily performing and nonperforming mortgage notes. His financial acumen and proprietary set of investment criteria enable him to purchase underperforming real estate assets at a deep discount of face and market values, thereby increasing the value of the assets. This, coupled with his ability to maximize the use of leverage, enables him to build strong, secured portfolios with solid passive income flows.
