How to Survive an Economic Winter
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Everything goes through seasons. The economy and investing in real estate is no different.
Before COVID, summer was red hot. People were saying, “The market is too hot,” then COVID brought everything to a screeching halt and all of a sudden, it was Arctic freezing cold. People started to say, “Oh, it's too cold right now. Maybe I should wait till it warms up.”
Within months, it warmed up and people said, “It's too hot,” again.
For years, probably since 2015 or 16, the Market was on a tear. You couldn't you couldn't go wrong with real estate. It was really long summer, but then with the volatility of COVID, we skipped the fall and landed right in winter.
We're in winter right now.
You can argue whether in the beginning middle or towards the end of it, but it seems we're in a recession right now.
Some people say, “Oh, well, we're not really recession,” but if you look at the numbers, you see various indicators that in hindsight will look like a recession. For example, housing prices are falling and interest rates going up. More importantly, inflation has been a major problem. Personal credit card debt is the highest in the history of the U.S.
People are using credit cards to pay the bills, and at the same time, the savings rate is at a record low, which means that people have depleted their savings and are now going into credit cards.
If you look at the jobs report, you see a lot of jobs are being created, but if you look at the fine print, it's actually not new jobs being created. It's people taking second jobs. Why are people taking on a second job? Because they're not making enough money in their first job.
That's not a sign of a strong economy.
It's a sign of a weak economy.
People are getting squeezed on their expenses and as a result, the demand is down somewhat. Retail spending is down, which is why you see some retailers like Amazon, laying people off. There are also tech companies laying people off, and that's because the stock market is down, and the money has stopped. The cheap money has stopped flowing.
I think that things are going to get worse before they get better. How much worse is hard to tell. I don't think it's going to get catastrophic, but it may get worse before it gets better.
But here's the good news.
This is from my from my own experience, as well as studying millionaires and billionaires. If you do okay, in the winter, you will do very well in the spring and summer.
I'm convinced that we'll have more new millionaires in the next five years and any time in history.
We're in winter right now., and what we need to do is survive that winter in a way that sets us up to thrive in the spring.
Right now, we're in a place of uncertainty. There's a lot of fear about what's looming. People are not sure what to do.
Our plan is to continue to acquire properties and set up the right game plan for that property no matter where it's at in the cycle.
That's how we're surviving winter and preparing for the spring.