A decade after the collapse of Lehman Brothers sparked a plunge in markets and a raft of emergency measures, strategists and experts think the next crisis could be in 2020. Many people assume there will be a crash just as bad or worse than the last crash we had about 10 years ago. However, real estate investment is still a great option.

Real estate is a distinct asset class that is simple to understand and can enhance the risk and return profile of an investor's portfolio. On its own, real estate offers competitive risk-adjusted returns, with attractive income streams. It can also enhance a portfolio by lowering volatility through diversification. Though illiquidity can be a concern for some investors, there are ways to gain exposure to real estate yet reduce illiquidity.

Before the housing market crisis from 2008 to 2012, the banks were being ridiculously unreasonable,  creating toxic loans that had a good chance of never being paid back. They were making extravagant loans to anyone applying for a loan, letting people accept really high monthly mortgage. Some investors were able to buy several real properties using hardly any of their own money. Because there was so much demand, properties were being built rapidly.

The collapse of the so-called housing bubble ensued because there were so many homes for sale and not enough people to buy them, leading to mortgage delinquencies and foreclosures and the devaluation of housing-related securities.

Because banks are not being as unreasonable as they were before 2008, affordability and interest rates could slow down the market, but they won’t cause a crash. They could cause a slowdown or even a slight decrease in prices, but many other countries have less affordability than the U.S. for decades. Therefore, we will probably never see prices as low as they were right after the 2008 crisis.

Sources:

• https://www.theguardian.com/business/2019/jan/05/global-economic-crash-2020-understand-why
• https://www.investopedia.com/articles/mortgages-real-estate/11/key-reasons-invest-real-estate.asp
• https://www.forbes.com/sites/forbesrealestatecouncil/2019/01/04/should-you-wait-to-invest-in-real-estate-until-the-housing-market-crashes/#70b4f7d317d7
• https://en.wikipedia.org/wiki/Subprime_mortgage_crisis