Tips for recent grads...
---- How you got here ----
Born between 1999 and 2003.
Crazy real estate bubble.
Cheap and plentiful debt.
Property prices soared.
Then the music stopped.
Subprime crisis.
Home prices crashed.
Lehman Brothers.
More bank failures.
GFC = really scary.
The Fed launched a 15-year fever dream (ZIRP).
Near-zero interest rates.
Good times.
Lots of $ made.
Then came COVID.
Panic.
Another crash.
Social distancing.
Zoom classes.
The Fed doubled down on ZIRP.
More profits.
Runaway inflation.
The Fed slammed the brakes.
Interest rates more than doubled.
Values plummeted.
Sellers want X. Buyers can only pay X minus Y.
Much slower transaction volumes.
You are here: entering the workforce.
---- Back in my day ----
Older professionals love to say:
“You’ve never lived through a recession.”
But here’s what we often leave out:
We hadn't lived through ZIRP at your age.
We invested and bought properties before the run-up.
We took risk when rates were low and debt was plentiful.
We made a killing.
Brilliance had nothing to do with it.
We were born at the right time.
Yes, we faced and survived a crisis, but then we were gifted the most extraordinary bull run in modern financial history.
Many people are again saying the odds of recession are high, and since we've scared the hell out of you with our recession stories, we're telling you to be cautious.
---- Takeaways ----
1. You’ve never seen a normal market. You’ve only seen extremes.
2. ZIRP generated fortunes for Boomers, Gen Xers, and Millennials. Many of them are in the process of losing those fortunes, but most are still well ahead of where they started.
3. It's rarely as good or as bad as it seems. $2 trillion traded at 4.4% 10Y yields pre-GFC, and now the 10Y is back into the mid 4s. It just feels worse coming out of ZIRP.
4. Recessions can be painful, but they also create opportunities.
5. Commercial real estate is a unique sector. It will likely be harder to make $ over the next ten years vs. the last ten years, but there will be opportunities.
---- Navigation tips ----
Over the next few days, we’ll be sharing advice for recent grads interested in real estate. Honest, tactical stuff. The kind we wish we had and what we see working for our alumni. Tips on how to navigate today's market realities.
First piece of advice:
Know the past but interpret it with a grain of salt. Don’t fear the future.
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