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In the current economic climate, many Americans are feeling the strain of rising living costs and mortgage payments. With recent Federal Reserve interest rate adjustments, potential instability in the job market, and unprecedented growth in housing prices over recent years, it’s natural to question whether we’re approaching another real estate downturn. While challenges exist, the Trump administration has implemented several measures to help stabilize the housing market and support homeowners.
Housing prices have seen increases in recent years, with some markets experiencing 100-200% growth. This rapid appreciation has raised concerns about affordability and sustainability, especially as inflation affects other essential living expenses.
According to economist Chris Vermeulen, founder of The Technical Traders, “People are going to have to start selling their homes because they can’t afford their mortgages.” He suggests that the current challenges may be “the tip of the iceberg” and predicts that “the real estate market gets hit” in another couple of years.
In response to the COVID-19 pandemic, the Trump administration implemented several measures to support homeowners. The CARES Act, signed into law in March 2020, provided mortgage forbearance options for federally backed mortgages, including those insured by the Federal Housing Administration (FHA) . By the end of Trump’s presidency, more than 7 million homeowners had entered forbearance plans, helping to prevent a wave of foreclosures during the economic downturn .
Despite these efforts, commercial real estate faced challenges. By March 2024, commercial foreclosures had risen to 625, marking a 117% increase compared to the low in 2020 . This surge reflects mounting distress in the commercial property market.
Recent Federal Reserve interest rate adjustments have drawn comparisons to the rate hikes that preceded the 2007-2008 housing crisis. While there are similarities, today’s regulatory environment provides stronger protections against the lending practices that contributed to the previous crash.
The administration has worked closely with the Federal Reserve to balance inflation control with housing market stability. The focus on addressing supply chain issues and increasing housing inventory represents a better approach than was taken in previous market cycles.
Still, the impact of higher interest rates on mortgage affordability remains a concern for many homeowners and potential buyers. This is particularly true for those with adjustable-rate mortgages facing reset periods in the coming years.
Real estate markets historically move in cycles, with periods of growth followed by corrections. These cycles typically span about 18 years, according to some analysts. Understanding these patterns can help homeowners and investors prepare for downturns.
For homeowners with “underwater” mortgages (owing more than the home’s current value), maintaining mortgage payments is key. Real estate has proven to be a solid long-term investment, even through market fluctuations. The challenge comes when external factors like job loss, health issues, or family needs force a sale during a down market.
This market correction, while concerning for many, could present opportunities for those who are financially prepared. Having liquid assets available during a market downturn can allow investors to purchase properties at favorable prices when others are forced to sell.
This is where a reliable financial tool like whole life insurance can provide distinct advantages during uncertain economic times.
Whole life insurance shares some valuable characteristics with real estate as a long-term asset, but with some unique advantages during market volatility:
Unlike real estate, which fluctuates with market conditions, whole life insurance provides guaranteed cash values that grow regardless of economic conditions. This predictability is valuable during times of market uncertainty.
A well-designed whole life insurance policy accumulates cash value over time through guaranteed growth and potential dividends (in participating policies). This cash value represents equity you own in the policy and becomes a valuable asset as the years progress.
One of the most powerful features of whole life insurance is the ability to access your cash value through policy loans. This liquidity can be crucial during economic downturns or when opportunities arise.
When you take a policy loan:
This flexibility stands in stark contrast to home equity loans or HELOCs, which become harder to obtain during real estate downturns and require extensive qualification processes.
In a well-designed whole life policy, cash value can accumulate more quickly than equity in most mortgages, especially in the early years of a mortgage when payments are primarily going toward interest.
This means that while you’re building equity in your home through mortgage payments, you can build a second source of equity through your whole life policy. This dual approach creates financial synergy – your growing policy cash value can eventually provide options for addressing your mortgage, whether through reducing the balance, refinancing at a better rate, or even eliminating it entirely.
For those concerned about a real estate downturn, incorporating whole life insurance into your financial strategy offers several advantages:
Having access to policy cash values provides a safety net if housing prices decline or if you experience income disruption. This can help you maintain mortgage payments during difficult periods, avoiding foreclosure and the need to sell property at disadvantageous prices.
If a market correction does occur, those with liquid assets available will be positioned to acquire properties at favorable prices. Policy loans can provide this capital without the timing constraints and qualifications required by traditional lenders, who often tighten lending standards during market downturns.
As your real estate and whole life insurance assets mature over time, they complement each other in your overall financial picture. Real estate provides potential appreciation and usage value, while whole life insurance offers guaranteed growth, death benefit protection, and accessible liquidity.
While universal life insurance products might seem attractive because of their flexibility, they lack the stability and guarantees that make whole life insurance an ideal companion to real estate investments.
Universal life insurance policies, including indexed and variable versions, are built on annually increasing term insurance with an investment component. This structure creates vulnerability during market downturns when stability is most needed.
Whole life insurance, by contrast, provides:
These guarantees provide the reliability required for long-term financial planning, especially when considering real estate market volatility.
Imagine a homeowner who purchases a $500,000 property with a 30-year mortgage at current rates. They also establish a whole life insurance policy with an appropriate premium commitment.
After 10 years, they’ve built some equity in their home, but the majority of their early mortgage payments went toward interest. However, their whole life policy has now accumulated substantial cash value that can be accessed through policy loans.
If a market downturn occurs at this point, they have several advantages:
This alignment of financial tools creates resilience that pure real estate investment or conventional savings approaches can’t match.
Whether a major real estate correction materializes in the next few years or not, building financial resilience through tools like whole life insurance provides peace of mind and opens up opportunities in any economic climate.
A well-designed whole life insurance policy offers:
Not all whole life insurance policies are created equal. To maximize the benefits described above, proper policy design is essential. A policy designed for cash value growth will perform very differently from a standard whole life policy focused on death benefit.
Factors in policy design include:
Working with a knowledgeable professional who specializes in designing policies for financial flexibility is vital to achieving the best results.
Participating whole life insurance policies have the potential to pay dividends, which can greatly enhance policy performance over time. While dividends are not guaranteed, many established mutual insurance companies have paid them consistently for over 100 years, even through major economic downturns including the Great Depression.
These dividends can be:
This dividend component adds an element of upside potential to whole life insurance while maintaining the underlying guarantees that form its foundation.
While there are legitimate concerns about the stability of the real estate market in the coming years, those who take proactive steps to build financial resilience will be better positioned to weather any potential downturn.
Whole life insurance, with its guaranteed values and liquidity options, represents an ideal complementary asset to real estate holdings. By building cash value that you can access regardless of market conditions, you create options for yourself and your family that will serve you well through any economic cycle.
For homeowners concerned about market volatility, exploring how a properly designed whole life insurance policy could fit into your financial strategy is a prudent step toward greater financial security and opportunity.
McFie Insurance has been helping clients design and implement effective whole life insurance strategies for over 18 years. Their expertise in policy design and implementation can help you establish a financial foundation that works synergistically with your real estate investments to maximize long-term growth and security. Contact us to explore how whole life insurance could enhance your financial resilience in today’s uncertain real estate environment.
Tomas P. McFie DC PhD
Tom McFie is the founder of McFie Insurance and co-host of the WealthTalks podcast which helps people keep more of the money they make, so they can have financial peace of mind. He has reviewed 1000s of whole life insurance policies and has practiced the Infinite Banking Concept for nearly 20 years, making him one of the foremost experts on achieving financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.
This free binder has the information to build your own Infinite Banking system.
