September 28, 2023
September 28, 2023

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The Resilience of Real Estate

There’s lots of noise about the residential housing market. Real estate has long been considered one of the best-performing assets, offering both financial stability and the potential for significant returns. Yet, like any investment, real estate is not immune to market fluctuations. Throughout history, however, the US real estate market has demonstrated resilience, with home prices consistently appreciating over time. This article will focus on several “scares” in the housing market but will highlight how quickly things bounced back.

The US real estate market has experienced several downturns, often tied to broader economic factors such as recessions, financial crises, or localized market conditions. Notably, the Great Depression of the 1930s brought significant challenges to the housing market, leading to a decline in home prices nationwide. Another instance occurred during the 1980s when the US experienced a significant recession. High inflation, rising interest rates, and an oversupply of properties led to a decline in home values in various regions across the country. Similarly, the burst of the housing bubble in the mid-2000s during the subprime mortgage crisis led to a substantial decline in home values, resulting in negative appreciation in many areas.

Yet, even during these challenging times, real estate demonstrated its resilience. Following the Great Depression, the housing market slowly rebounded, and home prices eventually recovered and surpassed their previous highs. Similarly, after the housing market crash in the 80s and following the ‘Great Recession,’ the real estate market experienced a period of stabilization and subsequent growth, reinforcing the long-term value of real estate as an investment.

Despite these occasional downturns, real estate remains an attractive investment option for many reasons. One key factor is the inherent stability and tangibility of real estate assets. Unlike stocks or other financial instruments subject to market volatility, real estate provides a tangible and physical asset that tends to withstand economic fluctuations. People will always need homes and properties for various purposes, ensuring a consistent demand for real estate. We see that very much playing out in today’s marketplace with the lack of available homes.

I recently spoke with a couple who purchased a modest home in a suburban neighborhood in the late 1970s. They diligently paid off their mortgage, maintained the property, and rode out several dips in the market. Over the years, their home appreciated steadily, benefiting from economic growth and increasing demand in their area. A few years ago, at retirement age, they decided to downsize and move to a smaller home. They sold their original property at a significant profit, enabling them to purchase their new home outright and have substantial savings for their retirement years. The long-term investment in real estate provided them with a comfortable and stable home and became a source of financial security and independence.

While the US real estate market has experienced temporary setbacks and negative home price appreciation in certain time periods, these instances should be viewed in the context of broader market fluctuations. Real estate, as a tangible and versatile asset class, has consistently demonstrated its ability to rebound, recover, and provide attractive returns over the long term.

Furthermore, real estate offers the potential for multiple income streams, making it a versatile investment. Rental properties, for instance, provide ongoing cash flow through rental income, while properties held for appreciation can generate significant returns when sold in a favorable market. The ability to leverage real estate investments through mortgages also enables investors to amplify their returns.

The bottom line is that investing in real estate requires careful research, due diligence, and an understanding of market trends. The occasional dips in home prices should not deter potential home buyers but rather motivate them to seize opportunities during market downturns. By focusing on the resilience and potential of real estate as an investment, individuals can position themselves for long-term financial success and security.

Shoutout and happy birthday wishes to Daniel Altaras, Etai Barach, Moshe David, Sara Diament, Adam Leffel, Leah Lightstone, Rachel Nadel, Sheldon Neal, Mindy Neiss, Allen Pfeiffer, Jake Rosenberg, Sara Schreier, and Tamar Teller

Shmuel Shayowitz (NMLS#19871) is a highly regarded Real Estate & Finance Executive, Writer, Speaker, Coach, and Advisor. He is President and Chief Lending Officer of Approved Funding, a privately held national mortgage banker and direct lender. Shmuel has over twenty years of industry experience, holding numerous licenses and accreditations, including certified mortgage underwriter, licensed real estate agent, residential review appraiser, and accredited investor, to name a few. Shmuel has successfully navigated through many changing markets and business landscapes, making his market insights and experience well-coveted within the real estate industry. He can be reached via email at [email protected]. 

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