We recently asked firsttuesday readers: At what point in the economic cycle is California as we head into 2023?
236 readers weighed in, with:
- 55% agreeing California is already in a recession;
- 34% saying we are heading into a recession; and
- 11% saying we are nowhere near the next recession.
Official recession declarations come several months after a recession actually takes hold of the economy. Further, 2022’s economy has sent mixed signals all year, including:
- two consecutive quarters of negative gross domestic product (GDP) — the unofficial marker of a recession; matched against
- a steadily recovering jobs market, with California finally regaining a full employment recovery from the 2020 recession in October 2022.
Much of this mixed dynamic can be attributed to continued spending by consumers — unmatched by incomes or savings. In other words, even if an official recession declaration cannot be made in 2022, the economy is on borrowed time heading into 2023.
Related article:
Economic recession or not, the housing market recession is here
Surviving the real estate recession
While an economic recession is still waiting in the wings, the recession for California’s real estate market is already center stage.
In 2022, the real estate recession has caused:
- decreased home sales volume;
- losses in residential construction;
- higher inventory; and
- deep cuts to home values.
For example, California home prices peaked in May 2022. As of September, prices range from 6% below the peak in the low tier to a staggering loss of 9% in the mid and high tiers. This rapid decline took place over just four months — and prices are still plunging.
Losing equity fast, sellers are beginning to panic and homebuyers are taking a big step back. But career professionals are in this for the long haul — how are agents surviving the slowdown?
Real estate professionals who wish to maintain a living even as traditional market participants take a step back from housing are fast learning to pivot, taking on alternative streams of income. This includes:
- obtaining a higher fee split by upgrading to a broker’s license;
- gaining new marketable skills like becoming a notary public;
- earning a mortgage loan originator (MLO) endorsement to assist homeowner clients obtaining a mortgage;
- rounding out your skillset by becoming a property manager — one of the few recession-proof real estate jobs;
- becoming a foreclosure and short sale specialist, as distressed sales inevitably rise when home values drop;
- assisting with the management and sale of real estate owned (REO) properties; and
- using the recession as a launchpad for investment by becoming an expert in forming real estate syndicates and 1031 exchanges.
Poised to profit off existing contacts in real estate-adjacent careers, these agents and brokers will survive and succeed even as the housing market continues to slip deeper into the recession.
Related article:
MLO recession side hustle guide Part 1: Originator fees are slashed
