Republicans and Democrats are still at an impasse going into the holiday weekend as June 1 approaches.
If the U.S. defaults on its debt and no solution for the debt ceiling crisis is reached, mark my words, there will be a market crash of some sort.
Scarily enough, all four of the factors that led up to stock market crash of 1929 (the beginning of the Great Depression) are present today.
Declining real estate values
And regardless of what happens with the debt ceiling crisis over the next month, there is one sector of the market that is already headed towards a crash.
Sadly it is in my favorite sector of the market, and one day it may be known as the Real Estate Crash of 2023.
Let me be clear: Although the entire real estate market will likely be affected, I believe the brunt of the damage will hit this one sector within it.
Today I will talk about what is driving this downward trajectory, and how you can prepare your portfolio. If you are properly prepared, you will be one of the few who profit from this upcoming crash.
The Real Estate Crash of 2023
Based on what we are seeing in the market, our team at Wide Moat Research believes the commercial real estate market is in for a world of hurt over the course of the next 12 months.
And we’re not the only ones seeing it.
According to JPMorgan Chase CEO Jamie Dimon, “… the off-sides (Wall Street jargon for indirect consequence) in this case will probably be real estate. It’ll be certain locations, certain office properties, certain construction loans. It could be very isolated; it won’t be every bank.”
To avoid a bank meltdown like 1929, financial regulators made some aggressive moves to prevent contagion in the banking system; just like we’ve seen happen these passed couple months.
But there are still some significant problems.
The commercial real estate mortgage market for income-producing properties is roughly $4.5 trillion and around 80% of all bank loans come from regional banks.
These “certain” sectors Dimon is referring to are multifamily loans and office loans that represent over 50% of loans outstanding.
According to the Mortgage Bankers Association, around $728 billion (16% of total loans) will mature in 2023, with another $659 billion (15%) maturing in 2024.
The banks have already pulled back dramatically. And this means many landlords will have a difficult time refinancing debt maturities.
I was once a real estate developer myself (for over two decades), and I’m glad I don’t have to worry about refinancing debt in this environment.
Where will these landlords get the money to refinance their properties?
For small to mid-size commercial real estate owners, this will be difficult. And there will be tough times ahead, especially in the more challenged office and multi-family sectors.
How to Prepare Your Portfolio
While we have many of the same ingredients for another Great Depression, our research suggests that a modest (not mild) recession is the most likely outcome.
Right now, our team is seeing property values decline in the order of 20% to 25%. And we want to sidestep that risk.
That makes now the time to own shares in landlords that own some of the most sought-after properties in the world – those without the risk of debt maturities.
One way to do this is to become a “landlord” to one of the most lucrative companies in the world right now.
You see, there’s a way for investors to earn income from the world’s second-largest retailer, Amazon – even though the company has never paid (and might never pay) a dividend.
I just put together a special presentation called “Amazon’s Secret Royalty Program.” In it, I share exactly how to profit from Amazon’s success, regardless of the stock market volatility, banking crisis, or debt ceiling crisis.
And there’s a way for regular investors to earn checks from Amazon’s business, just like a landlord. With one of the most successful companies in the world on your side, you can keep your income growing through all the ups and downs.
The clouds are gathering, and we might be headed into the real estate sector crash of 2023. But through strategies like this, my goal is to help you sleep well at night through this crisis-crazed environment.
Happy SWAN (sleep well at night) Investing,
Editor,Intelligent Income Daily