Ten years into the largest bull market run in history, the question of, “when is the downturn starting?” is on a lot of people’s minds. It’s a fair question to ask, as the economic outlook across the county looks fairly strong. This is in regard to the economy as a whole, not individual sectors. The debate here at Loan Ranger Capital is where the downturn will start. The when is merely a matter of time.
Luckily, it appears real estate will not be the focal point of the next downturn. To be fair, it will be affected as other areas of a metro’s economy take a hit, but we doubt there will be the near systemic meltdown of a decade ago. Financial practices are heavily regulated nowadays, and that does not seem to be easing up anytime soon.
There are areas related to finance that seem prime to take a hit however, namely student debt and auto debt. Both of these areas of the debt markets are at all time highs. Student loan debt in particular is seeing the numbers of defaults rising at a steady pace. These sectors will experience hefty amounts of distressed product, and this will likely impact the communities where people affected by student loan debt reside (nationwide).
While this will impact real estate to some degree, much of the student loan debt that is currently in default seems to belong to the younger generation. This group of potential buyers has not seen much activity in home ownership as it stands. This may mean that the real estate market remains less turbulent during the time frame described, but that answer remains unclear at this point.