In the middle of an economic market downturn, there is an abundance of opportunity.

‘In the middle of chaos, there’s also opportunity’

I’m not going to pretend I’ve read the entirety of Sun Tzu’s timeless classic. But there are a few things that I’ve taken to heart as I grow. Whether it’s 1975, October 1982, May 1992, April 2009, April 2020 or where we are today.

Regardless of which side you are on in the debate of whether Canada is in a recession or not, we certainly all concede the last 11 months have been difficult on the Real Estate market. December 7th began a constant journey of escalating overnight rate hikes that have taken arguably the worst strongest real estate market to our current state of bleakness.

For a period, the economy demonstrated greater resilience than initially anticipated. The Bank of Canada consistently raised interest rates in succession. Nevertheless, the job market thrived, and GDP maintained its growth trajectory. Inflation numbers have fluctuated and depending on the day, this point and its impact on the market can be debated by some.

Nonetheless, economic challenges were bound to surface. The fluctuations in inflation have diminished consumers’ buying power and ambitions. The upward trajectory of interest rates has placed a strain on households. Presently, signs of strain have emerged in the data, and economists anticipate these signs to escalate. For those of the optimistic viewpoint February seems to be the consensus of relief.

In the meantime, we’ve witnessed inflation hit 4% in late Q2 and early Q3 thereby constricting consumer spending even though disposable income related to the Covid shut down has prompted retail.

In Canada’s largest real estate market in Q2 there was an increase in new listings, home prices and transactions to July 2022. When seasonally adjusted, the market achieved greater balance in July compared to July 2022.

Above all the statistics and shifts, an unparalleled influx of immigration both exists and looms. In the past year alone, over a million individuals relocated to Canada. This continued surge has boosted consumption while concealing certain fundamental vulnerabilities. Again, first principles supersede the underlying overpricing of the available supply.

Given the federal mandate to ensure the influx of new Canadian with advanced degrees has ensured demand remained somewhat constant.

By its verbatim definition the last year or so has been a lesson in chao and macroeconomics. The only threat to this influx is the inherent unpredictability of events and our world stability.

The hardest part about a recession is resisting herd mentality.

So how do we get through this? Everyone I know is reinforcing how bad I think it is. There must be some solution, positivity, a little hope to grasp to?

There are, in fact. Those who have been prudent and financially reserved have proved that deals are still to be done; especially when distressed property owners are over leverages.

It remind me about the world’s largest CEO of a prominent investment firm entering an elevator only to have the elevator doorman to tell this CEO in absolute exuberance that he is now buying the stock the CEO had been inventing in. Additionally maybe the story should be told of Fred Smith in 1973 with FedEx. Or the sell off of shares in Starbucks in 2009. None of which I care about; or should you. This is a real estate blog.

So what is one to do in an environment like this?

• During an economic downturn, it is common for stock values to experience a decline. While this may initially appear detrimental to an existing investment portfolio, refraining from selling during this period helps avoid realizing losses associated with the recession.

• Furthermore, the diminished stock values present an attractive opportunity for relatively cost-effective investments. However, it is crucial to consider investing during a recession only under the following conditions:

• Sufficient Emergency Savings: It is imperative to maintain a robust emergency fund, ideally covering three to six months’ worth of living expenses, with a bias toward the latter end of that range. If you have accomplished this financial milestone and possess surplus funds, you can consider investing. If not, it is prudent to prioritize building a substantial emergency fund before venturing into investments.

• A Long-Term Investment Horizon: Investing during a recession demands a resilient attitude. What may seem like an opportune moment to buy low could be followed by further portfolio depreciation. To minimize losses and position yourself for a positive outcome, it is essential to adopt a long-term perspective. Plan to leave your investments untouched for a minimum of seven years.

• Avoiding Obsessive Portfolio Monitoring: In periods of economic turmoil and heightened stock market volatility, the temptation to frequently monitor your brokerage account may be strong. However, investing during a recession necessitates restraint. Frequent checking can lead to anxiety and impulsive decision-making, such as prematurely divesting underperforming stocks, resulting in realized losses.

We could always so go Sauron Mode

Be proactive. Money is to be made in an economic downturn. Especially in the fall.

So……

Look around you. Half built home? Partially vacant commercial investment building? Mold on a ‘For Sale’ sign wedge into the lawn of a great location? Sparce parking lot at an above average retail free stander? Maybe you’re larger, maybe you are aware of a site the city wont give approvals to? Did someone get into student housing for the first time?

Evaluate the Time Value of Money.

Keep in mind that recessions have actually produced more millionaires than prosperous times. Those who achieve millionaire status are not the ones who simply observe from the sidelines. Like any keen investor make you move when there’s discounts.

Commit to a decision to take action, take the initiative to act upon it!

And of course remember; Lenders always lend so get out there and hustle.

Of course Lenders employ a commission based sales team, then need to transact which is perfect for you as a Buyer.

Now’s your chance, contact your favorite Mortgage Broker (me).

Let’s get you in at the lowest price point and watch it accrue.