Coronavirus Updates

The Impact of Coronavirus on Real Estate Markets

Expertise: Real Estate Investing Basics, Real Estate News & Commentary, Flipping Houses, Mortgages & Creative Financing
36 Articles Written
aerial view of houses and culdesacs and tree-lined streets

On March 11, 2020, the World Health Organization (WHO) officially designated the coronavirus and COVID-19 (the respiratory illness it causes) a pandemic. Cases have occurred in 114 countries and resulted in approximately 120,000 infected people and more than 4,000 deaths.

Although the statistics and the ways the illness affects individuals' lives are rapidly changing, we've taken a look at how the outbreak is impacting U.S. domestic real estate markets up to this moment.

A Summary of Related Economic Events

Will Economic Volatility Caused by Coronavirus Impact Real Estate?

Despite what many people believe, there isn’t a direct connection between stock market performance and real estate values. It’s the overall health of the economy (which prior to the events of the past two weeks, was still considered relatively strong) that ultimately affects them both. As long as consumers feel confident about their jobs and income, they will continue to spend—and that includes buying real estate.

Among other things, the strength of the real estate market is impacted by treasury bond prices, which are correlated to mortgage rates. When the stock market and other asset classes start to see a lot of volatility, investors will move their cash to bonds for stability and security. As demand for treasury bonds increases, however, bond prices go up and their yields (the interest they pay investors) fall. And that pulls mortgage rates down, too.

It’s worth noting that the catalyst for today’s economic situation is very different from the 2008 financial crisis, which was directly caused by issues in the sub-prime lending market. During that recession, sub-prime mortgages were bundled up and sold for much more than they were worth. Ultimately, real estate speculators let homes financed by these mortgages go into default, and these bundles of mortgages—called credit default swaps—lost most of their value, bankrupting large investors and starting a domino effect that rippled through all aspects of the economy.

Related: 5 Tips to Survive a Coronavirus-Induced Recession (& Thrive Afterward)

The current stock market volatility is not the result of issues in the real estate market, but is specifically the result of uncertainty about how the coronavirus may impact supply chains and corporate earnings. While it remains to be seen, real estate may be insulated to some extent because of tight residential inventory, high buyer demand, low mortgage rates, and lower prices for lumber and oil.

closeup of folded stacked newspaper with business section visible

But this is a continually evolving story. As of this writing, 10 states have ordered everything from mandatory shutdowns of all non-essential businesses to limits on restaurants, only allowing delivery and take-out options. Everything from Broadway to Disney World to Colorado ski resorts are at least temporarily closed, and discretionary travel has for the most part stopped.

While the businesses involved may (or may not) have the resources to survive these conditions, there is no doubt that employees will be immediately and directly affected. Not only are their hours and income suddenly in jeopardy, but their jobs may go away. And this will impact real estate markets.

When people start to lose their jobs and see their hours and wages cut, their disposable income drops. This results in their spending less money, one of the most important factors in maintaining the health of the economy. A reduction in spending directly (and negatively) affects U.S. GDP, unemployment, and income growth—all of which are needed to support housing prices.

In other words, if employers see long-lasting decreases in revenue, they will start laying off employees, and their laid-off workers will have less to spend—which slows growth further and creates a vicious cycle leading to more layoffs. This would affect housing markets by tipping the current balance of low supply and high demand.

Savvy investors should keep a close eye on these developments, as well as continue to track mortgage interest rate changes and any government stimulus packages enacted to help ease the impact of coronavirus on the overall economy.

What About a Recession?

By definition, two successive quarters of declining GDP officially represents a recession, and recessions always have significant impact on individuals’ incomes. Reduced income and wages results in homebuyers and renters having less to spend on their monthly housing costs, leading to lower home prices and lower market rents.

It’s worth noting that we might already be in a recessionary period (we won’t know until today’s economic data is released a couple months from now). In addition, Goldman Sachs has forecast significant declines in U.S. GDP from now through June. And UCLA Anderson School of Management’s Anderson Forecast says that the economy has stopped growing and won’t recover until the end of September.

Related: 5 Ways the Next Recession Can Make You Rich

It’s still early in this crisis, but we expect hospitality-related real estate markets to experience the most immediate impact. Hotels, for example, will probably not be able to recover lost revenue, and planned construction in this sector is likely to be put on hold for the foreseeable future. Airbnb properties will probably be hit very hard, because once customers start traveling again, they will be more wary of the cleanliness of privately owned homes compared to larger chains with professional maintenance and cleaning staffs.

dictionary entry defining the word recession which is highlighted in pink

The impact on commercial real estate remains to be seen. It’s a slower-moving, more stable market that responds much later than more volatile indicators like stock performance. Cushman & Wakefield notes that “if the virus has a sustained and material impact on the broader economy, it will have feed-through impact on (commercial) property…”

Commercial real estate is also comprised of many different asset classes—from office to retail to warehouse—and each of these asset classes may respond differently during the next economic downturn.

That doesn’t mean there’s no potential bright side to all this negative news. During three of the last five recessions, home prices actually went up—anywhere from 1.9 percent to 4.8 percent. And if the economic impact due to coronavirus follows the pattern set by past public health issues, we may be poised for a strong rebound once the virus is under control and normal activities have resumed.

Additionally, there may be other factors that may lead to more desirable outcomes. As mentioned earlier, low inventory and high demand may help prop up the real estate market through the crisis. At the end of last year, the number of homes for sale was down 9.5 percent annually and the number of entry-level homes was 16.5 percent lower than the year before. Realtor.com already predicts historic inventory lows this year.

What If Coronavirus Directly Impacts Your Investments?

Depending on how all these details and forecasts play out, you could find yourself facing unexpected investment challenges, like reliable tenants suddenly unable to pay rent. Lower income workers with little, or no, savings could feel the greatest financial impact as various venues and businesses cancel events, limit hours, or completely close their doors.

But at the same time, more and more municipalities are putting eviction moratoriums in place as the health crisis unfolds. The federal government is being pressured to enact a national moratorium. As of this writing, Los Angeles, Santa Monica, San Francisco, Miami, Philadelphia, and San Jose, California, Austin, Texas, and the state of New York have either put moratoriums in place or have temporary holds on processing evictions.

If these circumstances affect your ability to meet mortgage payments, the Federal Housing Finance Agency (FHFA) has advised mortgage servicers to offer forbearance options. These will allow borrowers impacted by COVID-19 and related safety measures (like quarantines and business closings) to take advantage of hardship forbearance.

Options include temporarily reduced or suspended mortgage payments for up to six months, although interest will accrue during the forbearance period. Arrangements often provide a reinstatement or repayment plan to make up missed payments.

Coronavirus Wuhan. US quarantine, 100 dollar banknote with medical mask. The concept of epidemic and protection against coronavrius.

Are There Any Positives in the Current Situation?

The most obvious bright spot in the current uncertainty is low mortgage rates. Since the Fed usually doesn’t move quickly to undo stimulus efforts, rates are likely to remain low for a while. If demand and consumer confidence remains high, that presents opportunities to refinance existing properties and to move forward on new purchases.

Jerry Padilla, a lender in Rochester, N.Y., says, "Investors are already looking to refinance their properties and to make purchases while rates are so low." He adds, "Everyone seems to have a sense of urgency, but investors need to understand there will be delayed turnaround times as lenders are seeing huge influxes of business."

Colin Smith, a Realtor in Colorado Springs, Colorado, says, “We’re seeing extreme competition among single-family homebuyers that we haven’t seen since 2017.”

Be aware that there are a couple of scenarios in which the new lower rates might not be helpful, such as if you're underwater on the value of a property or in a fixed-rate mortgage that's not high enough to justify the expense of refinancing.

Home equity lines of credit (HELOC) are expected to come down soon in response to the new federal funds rate. If you have already borrowed on a HELOC, this will lower your interest expenses. If you've been considering a line of credit, it may be time to investigate the best available rates in your area.

Summary

The coronavirus’s ultimate impact on real estate markets will largely depend on the length of the outbreak and whether there is a quick recovery (with a return to overall social and economic stability) or a more extended one (in which medical outcomes are worse than expected, and consumer and economic disruptions linger).

At the moment, residential investments are well positioned, largely due to aggressive action by the Fed, low mortgage interest rates, and an advantageous balance between supply and demand. This has already resulted in an increase in residential property values over the past several weeks.

But some experts say that a recession has already begun that could last through the next several quarters. In anticipation of decreased economic performance, the FHFA has advised mortgage servicers to offer forbearance options to mortgage holders facing financial difficulties related to the coronavirus and COVID-19.

As a prudent investor, stay focused on factors that could change the outlook. For example:

  • Quarantines and social distancing will create slower revenue and growth in commercial real estate and may cause increases in defaults on commercial loans.
  • Uncertainty around our future economic outlook may move some buyers to the sidelines (reducing demand) and may induce some sellers off the sidelines (increasing supply).
  • According to Green Street Advisors, real estate investment trusts (REITs), usually safe havens during stock market declines, have been surprisingly hard hit by recent volatility.
  • New construction projects could be delayed by supply chain disruptions or possible labor shortages.
  • Travel and related industries could have a ripple effect as major air carriers make significant cuts to their schedules and begin to ask staff to take unpaid leave.
  • Realtor Colin Smith reports that some of his lending resources have seen lack of activity on large blocks of mortgages for sale. If that becomes a trend, mortgage brokers could face difficulties generating capital for new business.
  • Look to trusted sources like BiggerPockets for insights on how these many different considerations are influencing markets, public health, and important decision-makers.

All of these analyses and recommendations are based on expertise, experience, research, and opinions. However, we remind you that it’s impossible to predict the future with any certainty. As a result, we emphasize that the wisest investors adopt a long-term perspective and don’t try to “game” the market. And as always, consult with your personal financial, business, and legal advisors before making any investment decisions.

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Recession-Proof Real Estate book blog ad

How are you handling rapid market changes? Are we in a recession? How will you adjust your investing strategy? 

Join the discussion in the comment section below.

By J Scott
J Scott runs a real estate company that invests in several parts of the country and that specializes in new construction, as well as purchasing, rehabbing and reselling distressed properties. J is ...
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    Scott Trench President of BiggerPockets from Denver, CO
    Replied 5 months ago
    J - we are very lucky to have your insights! Love the way you lay out the realities before us so convincingly, and you look like a genius (maybe because you are?) with the timing of your "recession proof real estate investing" e-book! Thank you for all you do!
    Mike Preshman Rental Property Investor from Waltham, MA
    Replied 4 months ago
    Good point Scott, the "Recession Proof Real Estate" ebook did have an interesting timing. Maybe Jay knew something ahead f the rest of us here, hmmm..?!? :)
    J Scott Developer from Sarasota, FL
    Replied 4 months ago
    If you read that book, you'll see why it was fairly obvious that we were heading towards a recession at some point soon (though I obviously couldn't have predicted this particular event). Fun fact: There have been 33 recessions in the US over the past 160 years...or about once every 5 years, on average...
    J Scott Developer from Sarasota, FL
    Replied 5 months ago
    Thank you, Scott!
    Audrey Ezeh Real Estate Investor from Las Cruces, New Mexico
    Replied 5 months ago
    Thanks J!!
    Daryl Luc
    Replied 5 months ago
    A couple of salient points I didn't see in your article. Human behavior as it pertains to how they spend their money is based on something my team coined back in the 80's we called the F.U.D. Factor. Fear, Uncertainty and Doubt. Right now that is running at an all time high. The ability to motivate someone to move from where they are, to someplace else whether renting or buying (not just real estate, it applies to any large ticket) is directly in reverse proportion to how much toilet paper they feel they need to have on hand. A simplification, yes. Spot on...very. I've been 'investing', building, renovating, flipping and starting companies since the 70's and there's been a lot of F.U.D. during these 50+ years. Additionally, if you hold investment properties and are using residential mortgage instruments as opposed to commercial or 'landlord' identified financing via LLC or other....there is likely no forbearance.
    John Matthews Investor from San Diego, California
    Replied 5 months ago
    Interesting you say that. I just called all my mortgage companies for our investment properties (3) and of them the two that are residential mortgages are offering forbearance. The single one that we have commercial loans on (under an LLC) is offering nothing...yet. Of course, this is an n of 1 and anecdote does not equal data.
    Tom Veit
    Replied 5 months ago
    Excellent article J. This information was helpful as I am looking to buy my first property (owner occupied Multi-family). I was trying to price in the uncertainty of this pandemic, but sounds like it may not be having as much as an adverse effect on residential housing as I anticipated. Especially in the Philly market which is incredibly hot. One Quick clarification on subprime mortgages: The bundle of mortgages you refer to are actually called Collateralized Debt Obligations (CDOs). Credit Default Swaps (CDSs) are a type of derivative contract that says the seller of the swap will compensate the buyer if the underlying asset goes into default (in this case the CDO). In fact, you didn't even need to be an owner of the asset to buy the swap! Many sophisticated investors who foresaw the subprime mortgage crash bought CDSs on the CDOs to make a quick buck. Thanks for writing! - Tom
    Brad Taylor from Chicago, IL
    Replied 5 months ago
    Alas, The Big Short.
    Jay Williams Rental Property Investor from Los Angeles
    Replied 5 months ago
    J - Extremely helpful and welcomed insight. At this very moment we are considering whether or not to pull the trigger or not on a smf purchase in Torrance CA. The current conditions are making us nervous and seller did not want to agree to our terms, so we walked away (last week). This week we hear he wants to give us everything we asked for. Now what? Your article helps us determine 1) what we should be considering (we are super new to RE investing) and 2) insights into how to set up a contingency for what would be a concern for us!!! GOLDEN!!! THANK YOU!! THANK YOU!! THANK YOU!! I haven't read your book @ScottTrench mentioned but will look for it today!
    Martin Minkus from San Francisco, CA
    Replied 5 months ago
    Would go back to the seller and say 'sure, but the offer price is 5-10% lower than the one last week. If you wait another week it will probably be lower again.'
    Raul Villanueva Investor from San Juan, Puerto Rico
    Replied 5 months ago
    Great read, Thank You! For now our priority is to Stay home stay safe and stay healthy. Lets bunker down monitor the situation and take care of ourselves and our families. We will all get through this together! We are all professional Bigger Pocket investors-Time and the math will tell us what to do in our brave new world!!!...
    Scott D. Smith
    Replied 4 months ago
    Raul, are home prices dropping in Puerto Rico because of Coronavirus? I read that prices were rebounding the last couple of years so just wondering if recent events have reversed that momentum. Thanks, Scott
    Roberto Torres Real Estate Agent from San Juan, Puerto Rico
    Replied 4 months ago
    Hey Scott, there's a lockdown so no banks are closing at the moment. You can't show a property right now. It's too early to tell but I guess it's supposed to drop since people are losing their jobs and a lot of businesses are closing.
    Edward Briley None from Virginia Beach, Virginia
    Replied 5 months ago
    My agent sent me an email today asking what should be done about my tenants rent? I am lucky, I have mostly very good tenants that pay their rent on time or early every month, and they are allowed to work at home. Now with this being said, what happens with tenants that will not be able to pay their rent? Is it fair to allow them not pay because they are temporarily laid off, and have them live in my house rent free until they can afford to pay, meanwhile other tenants are still working and able to pay their rent. This is a bad situation with owners of properties that depend on the rent from their tenants to live. Many people are renting their properties out, simply because their real estate is still upside down, and they cannot afford to pay the mortgage on their home. Now, with this being said, what happens if this continues for several months? Do you think a tenant with past rent due of $5,000 dollars or more is going to stay in your property and pay you what they owe? The way the credit reporting today, that if a tenant skips on you, it is not even included on their credit. Alright people, tell me what to do?
    Sean David Gibson
    Replied 5 months ago
    Brandon Turner just released a You Tube video titled "Are your Tenants unable to pay rent due to coronavirus? Here's what to do!" It addressed this topic exactly. If you haven't watched it a highly recommend it. 4 steps for take with your tenants.
    Yessica Hernandez
    Replied 5 months ago
    Wondering the same! Hope we get an answer!
    Brad Taylor from Chicago, IL
    Replied 5 months ago
    Yeah wondering about this also! What tenant, who gets 3 months behind on rent, is likely to be able to pay that off anytime soon, even after the economy picks back up? Fortunately hasn't happened to me, but definitely wondering what best strategy is to be prepared!
    Donald Rosinski
    Replied 5 months ago
    I was interested in the same thing. As the property owner I understand some tennants will be in this situation. My question is how to handle it.
    John Olu Real Estate Agent from Laurel, Maryland
    Replied 5 months ago
    Thanks J. for not holding anything back as usual! I'm still here in BWI in case you need me.
    Jake B. from Maynard, MA
    Replied 5 months ago
    Thanks for this great post J. We'll have to wait and see how this plays out.
    Ley Nezifort Rental Property Investor from Brooklyn, NY
    Replied 5 months ago
    Great read! Thanks
    Tony Wooldridge Rental Property Investor from Walla Walla, WA
    Replied 5 months ago
    J- I have to concur with our fellow colleagues above, phenomenal post, and Scott is right timely indeed on your "recession proof real estate investing" book, great read by the way!
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied 5 months ago
    Great analysis Jason!
    Steven Lowe Real Estate Agent from Scottsdale, AZ
    Replied 5 months ago
    Well written and informative article. Thanks for posting it.
    Stephen Keighery Wholesaler from New Orleans, LA
    Replied 5 months ago
    Great article. I am ready to ride the market cycle whichever way it turns. "Be greedy when everyone if fearful and be fearful when everyone is Greedy".
    Eli Weiss Rental Property Investor
    Replied 5 months ago
    Great article! Amazing points!
    Adam Schneider Flipper/Rehabber from Raleigh, NC
    Replied 5 months ago
    Very well-written article. A couple points--look at other pandemics (as opposed to the real estate fiasco in 2008). When Sars hit, Hong Kong real estate pricing dropped very little, but activity cut in half (the power of isolation / social distancing). Very good perspective on the interest rates and impacts.
    Diego Hodge Rental Property Investor from Cleveland, OH
    Replied 5 months ago
    Great article. Thanks for the post.
    Todd A Etzler from Valparaiso, Indiana
    Replied 5 months ago
    We really need relief on 1031 exchange 45 day identification periods and the 180 day closing date.
    Alyssa Dyer from Oklahoma City, OK
    Replied 5 months ago
    Have you seen people struggling to find inventory?
    Brad Taylor from Chicago, IL
    Replied 5 months ago
    Awesome article J, thanks!!!
    Quito Keutla Real Estate Agent from Renton, WA
    Replied 5 months ago
    Thanks for your insight!
    William Amiteye Rental Property Investor from Ballston Spa, NY
    Replied 5 months ago
    Thanks J, great article. Agreed that the impact will be minimal ASSUMING things do not cascade into other areas. We still don't know how long this thing will last. The huge X factor is a treatment coming sooner than expected so people can return back to normal life. Nothing scares humans like a little invisible microscopic enemy! We are in uncharted territory where life as we know it coming to a standstill. The American economic engine, consumption, (70 percent of GDP) is coming to a grind. That is a seismic event! I think the biggest fear is the collateral damage that can be caused by many large (and small) companies not being able to satisfy their huge debt obligations and that causing a ripple effect into other industries as each unpaid loan/debt affects another company(industry) that affects another and so on and eventually to real estate. Many of these companies are starting to eat up into their cash and their lines of credit. Time is really of essence here! I am still buying, cautiously, but also keeping cash on the sideline just incase. Good luck folks!
    Stephen Steric Real Estate Investor / Agent from Simi Valley, California
    Replied 5 months ago
    William, spit on observations with the consumer/business debt problem here... I’ve had that discussion a few dozen times over the past couple years as the debt continued to grow, and then when the big one hits, they’ll all be holding the hot potato... let’s hope it’s not as bad as the forecasted models are pointing to... And J, great article. Keep your heads up everyone, there’s always a silver lining!
    Brandon Hendrick
    Replied 5 months ago
    At the time of the post rates were not at 3.50%. The last three days has seen the highest jump in rates in the last couple decades. Rates are currently holding at about 5.00%.
    Ashley Wilson Rental Property Investor from Radnor, PA
    Replied 5 months ago
    Great article as always J! A few thoughts... On the residential side, in our market, we have seen a proportional decrease of homes on market, compared to potential buyers. In other words the inventory still remains low, compared to the number of potential buyers, so transactions are still occurring (for now) at the same frequency. I believe the low interest rates are encouraging buyers, who were already in the market to acquire a property, to act now. The flip side is the fear buyers have in touring properties, coupled with lingering PTSD of the 2008 crash in the minds of buyers. I am not saying I think 2008 is the same as what we are experiencing currently, nor do I believe the fallout will be the same, however, I don't believe that the majority of the buyer pool (especially first time home buyers) understand the difference. Speaking of fallout, I do believe that the multifamily market has been in a bit of bubble. I believe this for several reasons (an article in itself). Whatever happens, I am pretty confident that the multifamily market will have a correction (reset so to speak) on cap rates. I have personally witnessed several sellers pull their properties off-market to hold for the economy to strengthen again. From a logistical point of view, transactions cannot happen without proper due diligence, and access to individual units for both the vendors, and for the tenants occupying these units is not feasible. While we all wait this out, increased vacancy and concession rates will take a toll on these properties, in multiple forms (hit to the NOI, as well as, qualification for varying loan programs), ultimately decreasing the evaluation of the property. Unfortunately, I think we have identified the first national factor that can catastrophically impact the multifamily sector.
    Jared Smith Rental Property Investor from UT
    Replied 5 months ago
    Thanks J!
    Aaron Garcia Investor from Oregon
    Replied 5 months ago
    Great Read. Thank you.
    Johnny Pineyro from Golden Oak, FL
    Replied 5 months ago
    Super job J. Thank you for the 30,000 foot view and how the various verticals interface. You make great points and the takeaway, for me, was it is too early in the game to panic. I believe in humanity and our ability to engineer our way out of anything including this black swan. I remain on high alert and hopeful that the end is near and we can return to normal. All the best, Johnny.
    Estrella Carolina Mckinney Investor from San Antonio Texas
    Replied 5 months ago
    Thanks for the article. Will continue to follow this forum. My mind went immediately to. Ok what kind of tenants do I have?. I have a teacher. I’m safe there. I have a doctor a health care provider I’m safe there. I have no tipped employees I’m safe there. I have one retail oh no. I might have to have money aside for that. This is another eye opening rollercoaster. We shall we. Just glad I have this site to get input. And thanks for people like you I was able to have money for raining days. Real estate is awesome but we can’t never let our guard down.
    Joshua Brooks Rental Property Investor from San Ramon, CA
    Replied 5 months ago
    Great article J...thank you.
    Jonah Freedman Rental Property Investor from Ithaca, NY
    Replied 5 months ago
    I am not sure people realize how crazy thing could get. My city is considering a rent freeze.
    Sandra Cantu Investor from Las Vegas, Nevada
    Replied 5 months ago
    In my backyard of Las Vegas, the scare is the influx of international tourists carrying this and any other type of virus to the major hotels and arenas as well as thrown into the mix the international residents who frequently travel - and so here we are, at a complete shutdown. The resident who moves here for a better climate and no sales tax may decide to venture towards other sunny states (Arizona, Texas, et al) side-stepping Sin City. This town was built on tourism and if that does occur, there could be a repeat of 2008. If one does additional research, the COVID-19 will not be over in 30, 40, 60 days. This could take several years and there are other strains that will be popping up. To quote Yogi Bera, "It ain't over until it's over."
    Justin Famulari Rental Property Investor from Charleston, SC
    Replied 5 months ago
    Although nobody will know the full extent of this event until we can look back on it and see the data, it’s great to hear some logical insight to what to be on the lookout for. Good read in a odd time in America.
    Joseph Chan from Jersey City, New Jersey
    Replied 5 months ago
    I'm going to go out on a limb here and say in 6-12 months you will see blood in the streets in certain asset classes of RE. We essentially had an unprecedented demand shock by shutting down bars and restaurants in several regions (and I believe a nationwide shut down is coming if you look at what Asia and EU has done). You have essentially put 15mm workers out of a job overnight. You can see this in unemployment numbers. The problem is they can't even go to work at another restaurant in the region because they are all closed. When you can't work, you cant pay rent. You charge up your credit card to pay for food. Even if we come out of lock down in 1 month, that demand doesn't come back instantly because people will be scared and they will be trying to catch up on bills. If lock down is longer, then we start to see small businesses (SMBs) close. How many SMBs have more than 1 or 2 months of working capital. How many blue collar workers live pay check to pay check? They either rent or have mortgages. When they can't pay that, you have foreclosures or lower multifamily occupancy. This all has knock on effects downstream. When homeowners give back their homes that affects banks and the holders of RMBS. When SMBs close shop the retail landlord has pressure because they have mortgages on the other side. I don't see any huge demand coming in to take up that slack. The difference in 2008 is we had rich buyers from Asia coming to buy properties. Right now the whole world is seeing a huge demand shock and is in the same boat as the USA. You won't see much international buying except at fire sale prices. There is a reason the smart money has been selling REITs because they know that RE that is tied to Retail stores, Offices buildings, and Multifamily will come under a lot of pressure. Housing takes a while to fall because it's not liquid like stocks. It will also take time for people to get late on payments and get evicted. I'm hoping that my analysis is wrong for the sake of many people but I don't think what I've said is untrue. I haven't even begun to speak on the following industries : airlines, hotels, restaurants, bars, sports, movie theaters, curises, real estate, banks, insurance, gyms, retail shopping. If you don't think these industries won't have layoffs which will compound the problem, then please feel free to buy here and call me in a year when you need to sell. I'm sitting on as much cash as I can because this is worse then 9/11 and 2008 combined. I'm not trying to be alarmist, but I'm laying out facts as I understand them.
    Kisha Peterson
    Replied 5 months ago
    Very insightful, thank you!
    Justin Munk from Logan, Utah
    Replied 5 months ago
    Great job! Good to be thinking about this.
    Henri Meli Investor from Morrisville, North Carolina
    Replied 5 months ago
    Good article. However, I would be in the more pessimistic category of people. There are simply too many unknown factors ... especially the human factors. Many Americans have never experienced anything like this before. This is really new territory and we don't know how people will react. Businesses and people have too much corporate debt and personal debt. People need these jobs to pay debt. Corporations need people to spend, spend, spend ... And municipalities/counties/states need revenues. Even when things start getting back to normal, many people will need to start from scratch, possibly without job, money and maybe high medical bills. Certain industries will take years to recover, which will depress cities, counties and therefore businesses. Personally, I would be a lot more cautious. Real Estate doesn't exist in a vacuum.
    J Scott Developer from Sarasota, FL
    Replied 5 months ago
    Hey Henri - Agreed these days. That article was mostly written about a week ago, before all the major lockdowns and quarantines. A lot has changed since then, and I'd probably write that article a bit differently today...
    Kyle Ogrodnick
    Replied 5 months ago
    Please do! As the situation evolves us new guys could use the perspective and insight.
    Matthew McNeil Rental Property Investor from Boise/Portland
    Replied 5 months ago
    J, I feel you’re being a tad bit overly optimistic. I agree with what you wrote; “Despite what many people believe, there isn’t a direct connection between stock market performance and real estate values.” You're right, there isn’t a direct connection, but there is a connection that’s one degree of separation between the two – unemployment. Stock market performance at the losses we’re seeing directly affects employment, which in turn directly affects the ability for people to pay rent. Residential investments may be well positioned based on what the Fed is doing, resulting in lower mortgage interest rates, but the single overarching question investors need to ask is “Can the tenant can’t pay the rent?” I agree with what Joseph Chan wrote above. There may not be "blood on the streets" but if people continue to be laid off and can't pay their mortgage then we're going to be in a world of hurt.
    J Scott Developer from Sarasota, FL
    Replied 5 months ago
    That article was mostly written about a week ago, before all the major lockdowns and quarantines. I don't think any of us had much of a clue that things would get this bad this quickly, but given the extent of social distancing that most people have put in place, we're seeing properties that won't close because appraisers won't go out or title companies are shutting down. There's no doubt that the short term pain will be significant. And there's a reasonable chance that the long-term pain will be even more significant. I think a lot of it will depend on the length of the shutdown and the steps that the government is willing to take to support the economy during this crisis. For the time being, I think we're all just guessing at the long-term consequences.
    Matthew McNeil Rental Property Investor from Boise/Portland
    Replied 5 months ago
    Agreed! Thanks J. And, thanks for all your insights here on BP.
    Jonathan Carl Bonck
    Replied 5 months ago
    Mortgage rates are actually high and in the 4's despite fed cut.
    Edward Seid Real Estate Agent from Seattle, WA
    Replied 5 months ago
    Rates are high cause the of the influx of refi's from a couple weeks ago. Banks trying to stave off demand by artificially raising their lending rates. It should creep back down once bank's pipelines return to normal.
    J Scott Developer from Sarasota, FL
    Replied 5 months ago
    Also because treasury yields are up a good bit since last week.
    Fred Moskowitz Fund Manager from Philadelphia, PA
    Replied 5 months ago
    Excellent article J! Thank you for sharing your insights with us.
    Craig Schaeffer
    Replied 5 months ago
    I have 130 rental units and my biggest concern with the Corona virus is rent collection. Are there any ideas on how to deal with tenants who will be unable to pay rent over the next several months?
    Amanda Lauren Brekke Realtor from Santa Rosa, CA
    Replied 5 months ago
    Great and knowledgeable article J!
    Mark Holbrook Accountant from Idaho Falls, Idaho
    Replied 5 months ago
    My commercial renter just sent me a letter asking for rent relief. Offered 3 months relief with a 6-12 month payback at 90% on rent and 100% NNN. Luckily I have the cash on hand to make this offer. Not sure what will happen if it continues on longer than 3 months???
    Brett Johnson
    Replied 5 months ago
    Excellent article, thanks for the perspective...
    Carlos Villanueva
    Replied 5 months ago
    In January we signed a purchase contract to buy a house. The closing date was set to May 1st, 2020. The inspection was uneventful. The appraisal was done before the Coronavirus and it came at the purchase price. Right now I am wondering a few things: 1. Could an appraiser take a second look at the house closer to the closing date to determine if the price is still correct? 2. If we decide to not buy the house, are there any ways to avoid losing the security deposit? (for example, convincing the bank that I could lose my job in the near future given current circumstances). I don't remember any contingencies on the contract due to pandemics. Thanks!
    Matt Dickens from Tempe, Arizona
    Replied 5 months ago
    I believe some states are rolling out COVID specific contingencies. I would look into that and ask your realtor.
    Sandy Gabin Rental Property Investor from Lawrence, Ma
    Replied 5 months ago
    Thank you J!
    Nathan Crumback from Grand Rapids, Michigan
    Replied 5 months ago
    Thanks, J!
    Lindsay Issler
    Replied 5 months ago
    Thank you for the insights! I just went into escrow today for a house in Southern California in a nice neighborhood near Culver City (which is where I work). We’ve been looking for a long time and have lost 3 precious offers. We typically wouldn’t be able to afford this house/win if it wasn’t for the virus. We made the offer Thursday and open houses were cancelled/empty this past weekend. We’re getting a 2.5% interest rate on our loan, which gives us an incentive to buy now despite the risks. I am really nervous about the market crashing, but it’s our dream starter home and we plan to be in it for 7-10 years. People think we’re crazy for buying right now. Is this either the best decision of our lives or the worst? So much anxiety over this discussion, which is already a big one. The coronavirus concerns adds a whole other layer of stress.
    Jacob Ayers Rental Property Investor from Houston, TX
    Replied 5 months ago
    Great insights, Jay. You're able to articulate these things into points I'm able to understand. Much appreciated!
    April Choi Flipper/Rehabber from Decatur, GA
    Replied 5 months ago
    J. Thanks! Impeccable article , gives light to this dark time. Exactly what i needed in order to make Project decisions.
    Suzan Hampton
    Replied 5 months ago
    This is a really helpful article, thank you! We had started looking to buy our first owner-occupied investment duplex here in the KC Metro right as the virus hit. Right now, the interest rates are appealing and our jobs are stable and we can work from home, thank goodness. If lenders, inspectors, and title companies are working next month, we may go ahead and buy if we find the right property. However, with the economic ambiguity, potential mass layoffs, and what may be a real hardship for renters to recover from (even if offered rent relief for several coming months), I'm thinking we'll need to get a killer deal on that purchase because we may need to assume that the 2nd unit will sit vacant for several months, or will rent for a lower amount than it would have in the very recent past. Any thoughts on if it makes more sense to wait til end 2020'ish to buy? Thanks!
    Dan Krupa Real Estate Broker from Kansas City, MO
    Replied 4 months ago
    Great job as always J!
    Kathy Kathrinus
    Replied 4 months ago
    I’m in the middle of 2 flips. What is a good strategy as far as getting them on the market? Wait until the economy opens and there is not such a sideline with buyers! Or just get them on the market now in case there could be buyers still looking?
    Renee Borden
    Replied 3 months ago
    I noticed the date on this article was nearly 2 months ago. It would be great to re-visit the stats and see what your thoughts are currently under the 30+ million unemployed figure and with large lenders halting re-fi's. Any updates would be helpful! Thanks for your insight.
    Eugene Vollucci
    Replied 3 months ago
    Eugene Vollucci, Calstatecompanies Great job!
    Ryan Pearson
    Replied 3 months ago
    I think real estate markets with a large amount of vacation rentals will be hit pretty hard. For example: Mission Beach, in San Diego has approximately 44% of it's residential properties used for short term vacation rentals: https://pacificbeachhomes.com/blog/coronavirus-affect-on-pb-real-estate/ These rentals are getting extremely low income. I think that the recent announcement from Freedie Mac allowing property owners forbearance without a balloon payment, will help, but there will still be significant shifts in the market.
    Ross Gallo
    Replied 3 months ago
    Great job J. Looks like this article is still holding relevant as I’m reading it late.