This Crisis Unfolds The Same as Last, Just 4x faster
We are entering the crisis. Top of the residential real estate market may stretch into the fall fueled by low rates. Corona virus impact coupled with oil price collapse will stress economy resulting in local / global repression of SFH (single family house) prices / economy. The present runoff on single family housing is similar to 2007. By the winter we will be in 2009, at or near the top of the SFH market.
Corona Virus Impact
- Immediate impact: Reduction in travel will impact hospitality and VR (vacation rentals) at first (sell your motel 6). It will impact service industry (disproportionality in heavy travel markets).
- Secondary impact: Uber drivers, insurance companies, delivery services, dry cleaners, retail, yoga studios, performers / athletes, manufacturing, housing, construction and by proxy the entire economy. School closures will disproportionately impact blue color. 2020 housing market boom is fueled by blue color, they are the last wave.
- Stock market losses will add to the chaos creating a new batch of opportunities.
Oil Price collapse impact
- Will further depress housing and other aspects of localitiestes with oil dependent economies.
Conclusion: corona virus and oil price impact will take billions out of economy, impact can be predicted, quantified and opportunities could be generated.
My prognosis and recommendations. (just for friends and family)
Sell SFR, we are near the top. Stress test your portfolio looking at ROE (return on equity). Look if the property will bleed at reduced traditional rents. Think of you want to keep / do in crisis. If you are in stocks, think of your portfolio. Think of desired cash position. I think we have 3-7 months runway left in SFR.