How does this story end? Prediction for 2020

Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes

6y

@Serge S.

The Great Correction. I think it all depends on when the government will allow everyone to go back to work. If it’s within a few weeks then we might have saved ourselves from an absolute destruction if our economy. If it’s a few months and the Fed keeps pumping Americans with money then stagflation will be the mid to long term killer.

As you said and I agree Hospitality, restaurants, and loan options will go first, followed by multifamilies.

We should have faced this head on in 08 when the problem was smaller. Now we’re about to see the house of cards fall. Who’s up for owner financing deals?

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

6y

deja vu all over again.

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Account Closed

Real Estate Investor · Marysville, OH · Member since 2014 · 242 posts · 196 votes

6y

I wouldn't anticipate things easing up in a few weeks...

https://twitter.com/jeremycyou...

4 Reply

Alex J.

Investor · Tarzana CA and Houston, TX · Member since 2015 · 326 posts · 130 votes

6y

What are the current condo prices in those hotels? id love to buy something in the area at that price!

Originally posted by @Serge S.:

I am perpetually game planning future moves and this exercise inevitably requires taking a position on how the near future will unfold and the best way to benefit. I am interested in hearing what BP users think is about to unfold. Here is how I see it:

Stimulus provides very temporary tenant relief. April bad debt spikes to 5-15%.

By mid April the banks tighten lending. Bridge debt disappears. 60-65% LTV becomes norm. DSC minimum over 1.5. Cash out refi impossible to get. Multiple appraisals required. Frozen capital until the market resets to new normal.

By summer economic vacancy of 15% becomes the new normal.

Vegas condos in trendy hotels like Signature MGM, VDARA, Palms are selling for $150-250k.

Hospitality assets will be trading on ten-x auctions and $1M will buy you a 100 key Quality Inn in a decent metro like Tucson, Houston, etc.

Multifamily holds on the longest as operators scale back cap ex and race to the bottom on concessions, rent price, etc.

Retail strip centers in urban sprawl suburbs sit vacant no debt market or tenancy demand.

Syndicators that purchased in last 24 months in "hot growing" markets like Vegas, PHX, at 3.5% cap rates etc get cleared out by 2021. No point to run large capex value adds without the rent bump but can't pay mortgage without the rent bump = disaster. There will be a whole class of very disappointed investors.

2019 Hottest SFR markets will become worst performing by 2021. Homeowners get bailed out and are allowed to refi and ride out job loss.

Media pins economic disaster on Trump, Biden gets elected and quickly passes stimulas #2,3,4.

Hoping none of the above turns out true but I've seen this movie before.

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Todd Dexheimer

Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes

6y

6-8 weeks and everyone is back to work. 2mm people collect 1-2 months of unemployment and get the government stimulus check. Rent gets paid by 85-95% of all tenants for April and May, then back to normal by July. A few properties that had no reserves are foreclosed on or sold distressed. The overall stock market and real estate market stay stagnate for a few months, with real estate lagging behind as usual by a few months. By the end of Q3 we are back in positive GDP territory and by the end of 2020 we are a net zero growth for the year as a whole.

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James De Stefano

Real Estate Agent · Houston, TX · Member since 2017 · 292 posts · 233 votes

6y

Originally posted by @Account Closed:

I wouldn't anticipate things easing up in a few weeks...

https://twitter.com/jeremycyou...

I really hope this is wayyyy off. I'm in Houston and it's mostly a ghost town. Will be a strange few weeks of isolation.

But this is a game changed for probably 3-4 months in the health sector minimum.... 9-12 months on the Confidence/ Economy/ consumption... re-adjusting will be huge.

It's gonna get bumpy.

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Account Closed

Real Estate Investor · Marysville, OH · Member since 2014 · 242 posts · 196 votes

6y

I hope it's wrong too. Surgical nurse friends of mine say nurses are going into quarantine like crazy right now because they are getting symptoms (being around so many sick people and whatnot). Might run out of nurses! Or I guess all the nurses with Covid-19 can continue to work in 100% Covid-19 only hospitals when it spreads enough.

1 Reply

Michaela G.

Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes

6y

Originally posted by @Todd Dexheimer:

6-8 weeks and everyone is back to work. 2mm people collect 1-2 months of unemployment and get the government stimulus check. Rent gets paid by 85-95% of all tenants for April and May, then back to normal by July. A few properties that had no reserves are foreclosed on or sold distressed. The overall stock market and real estate market stay stagnate for a few months, with real estate lagging behind as usual by a few months. By the end of Q3 we are back in positive GDP territory and by the end of 2020 we are a net zero growth for the year as a whole.

I'm with you! It may sound overly optimistic, but my gut is not really giving me negative vibes. I make most of my big decisions with my intuition. Buy or not buy a house, because it feels or doesn't feel right. Your gut knows. And while everything looks really negative now, I don't feel like it's going to be a prolonged situation.

15 Reply

Scott Mac

Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes

6y

For those who have bank loans on their vehicles, the lender may give forbearance, but I doubt the Auto Insurance companies will.

Some people pay Auto Insurance months at a time, some pay monthly, some get it with their homeowners insurance, but one thing that may bite a lot of people is miss an vehicle insurance payment and 'The Man" will come and Repo your car. Hello walking or riding a bus.

If you miss a homeowners insurance payment they will Place a policy on it and bill you (very expensive) and if you don't pay it--bye bye house. Hello Apartment or Homelessness.

I doubt they will give forbearance on insurance (does any one have any information to the contrary?)

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Matt R.

Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes

6y

Economy goes mostly on hold until treatments and eventually vaccines become online. Idk how long, some insiders say 18 months. Unemployment surpasses great depression stats. Massive multi trillion rescue package for homeowners and renters begins in meantime.

There is the old saying, "don't blank in my face and tell me it's raining" might apply to some who can't grasp. The economy is shutting down is the new reality.

Hopefully all the smartest guys are wrong this time and the crisis gets cancelled as fast as it came with new meds. Good luck!

2 Reply

Jason BottPro Member

Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes

6y

Originally posted by @Scott Mac:

For those who have bank loans on their vehicles, the lender may give forbearance, but I doubt the Auto Insurance companies will.

Some people pay Auto Insurance months at a time, some pay monthly, some get it with their homeowners insurance, but one thing that may bite a lot of people is miss an vehicle insurance payment and 'The Man" will come and Repo your car. Hello walking or riding a bus.

If you miss a homeowners insurance payment they will Place a policy on it and bill you (very expensive) and if you don't pay it--bye bye house. Hello Apartment or Homelessness.

I doubt they will give forbearance on insurance (does any one have any information to the contrary?)

Many insurance companies are allowing customers to postpone their monthly payment. This just started to be announced Thursday/Friday and we feel more companies will jump on board going g forward.

The key is to call the billing department of your particular insurance carrier and ask if there are options.

3 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

6y

Originally posted by @Todd Dexheimer:

6-8 weeks and everyone is back to work. 2mm people collect 1-2 months of unemployment and get the government stimulus check. Rent gets paid by 85-95% of all tenants for April and May, then back to normal by July. A few properties that had no reserves are foreclosed on or sold distressed. The overall stock market and real estate market stay stagnate for a few months, with real estate lagging behind as usual by a few months. By the end of Q3 we are back in positive GDP territory and by the end of 2020 we are a net zero growth for the year as a whole.

I like your version better than the orginal post suspect it falls somewhere in between and for sure certain regions do better than others.

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John Teachout

Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes

6y

I'm more in the camp with Kevin and Todd. I don't think the "worst case" scenarios play out at all. The economy was good and this will certainly knock it back but the underlying fundamentals are still going to be strong once people get back to work and start being consumers again. I don't think there are very many comparatives to be made to the 2008 meltdown although lots seem to be indicating this is the case again.

These types of virus things are not new and they don't usually last "years" like some have indicated. I fully expect that things will be back to relatively normal by sometime this summer.

4 Reply

Sam Josh

Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes

6y

@Serge S.

Ends with a lot more nicer and humbler people.

9 Reply

Michael Durham

Rental Property Investor · Salt Lake City, UT · Member since 2018 · 11 posts · 19 votes

6y

@Serge S.

This but much more bleak. Half of all small businesses gone within a year, large swaths of bigger corporations in chapter 11.

I don’t know how anyone can even begin to quantify the damage.

Meanwhile I got pitched by two different people to fund some decent sized project projects today to which I replied with laughing crying emojis.

Buy puts, people. It’s going to get much worse.

Net short and chill

7 Reply

John MorganPro Member

Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes

6y

The curve flattens out in 2 weeks and our hospitals, medical equipment and staff survive this scare. People start going back to work soon after that. Restaurants open back up and the summer season barely salvages the travel industry. Real estate remains flat the rest of the year until Trump is re-elected. At that point the economy and stock market recover and life goes on. :)

23 Reply

Account Closed

San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes

6y

I don't agree that voters, including Democrats, will really believe Trump caused this situation. He gets a pass on this one, in my opinion. Yeah, yeah, he could have done things better, faster, but I actually thought he did have a valid point about the flu statistics, etc. Anyway, I'm a moderate Democrat and I can't stand him, but I can't blame him for this. I don't think this will sway any voters into voting differently than they were going to vote prior to this virus.

I keep wondering if this is going to be like The Year 2000, when the world was supposed to shut down because all of the computers wouldn't know what to do when their clocks turned to the year 2000. We all waited with baited breaths for the complete meltdown of the world and then........nothing happened.

I know this isn't nothing, but I'm hoping that everybody is overreacting. I stopped listening to or watching the news. I highly suggest taking at least a day off and listening to comedy podcasts instead. Very therapeutic.

14 Reply

Pat L.

Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes

6y

This to will pass until the next but going forward forget REI & with apologies to 'The Graduate'...

Mr. McGuire: I want to say two words to you. Just two words.

Benjamin: Yes, sir.

Mr. McGuire: Are you listening?

Benjamin: Yes, I am.

Mr. McGuire: TOILET PAPER !!!

Benjamin: Exactly how do you mean?

Mr. McGuire: There’s always great demand for Toilet Paper. Think about it. Will you think about it?

3 Reply

James De Stefano

Real Estate Agent · Houston, TX · Member since 2017 · 292 posts · 233 votes

6y

Originally posted by @Account Closed:

I don't agree that voters, including Democrats, will really believe Trump caused this situation. He gets a pass on this one, in my opinion. Yeah, yeah, he could have done things better, faster, but I actually thought he did have a valid point about the flu statistics, etc. Anyway, I'm a moderate Democrat and I can't stand him, but I can't blame him for this. I don't think this will sway any voters into voting differently than they were going to vote prior to this virus.

I keep wondering if this is going to be like The Year 2000, when the world was supposed to shut down because all of the computers wouldn't know what to do when their clocks turned to the year 2000. We all waited with baited breaths for the complete meltdown of the world and then........nothing happened.

I know this isn't nothing, but I'm hoping that everybody is overreacting. I stopped listening to or watching the news. I highly suggest taking at least a day off and listening to comedy podcasts instead. Very therapeutic.

Good post, but you're assuming that many voters are actually using LOGIC when they vote. The vote from a person who has followed the news and politics closely, counts the same as some one who say " That guy talks weird. I'm not voting for him/her"

I've given up on having sound, political conversations with many family members. Stubborn gonna stubborn.

And this is far from the 2000 computer glitch fears, this has affected every facet of society in a matter of weeks/days.

It's not going to be like pushing the reset button on life, but the fallout here will be substantial. The summer economy is a big, big big deal

2 Reply

Joel OwensBusiness Member

Moderator

Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

6y

"Retail strip centers in urban sprawl suburbs sit vacant no debt market or tenancy demand."

This is more in in outer space Serge ( a few really weak centers and areas might see this but not many). Haven't talked to Serge in years but he tends to be a value buyer. I could see a few spots in a center going dark from weak tenants but could be upside in the long term if tenants are paying way below market rents.

My opinion is all predicated on how long the virus takes before peaking. I was talking to a worker at a grocery store recently and he has friends in Italy. He mentioned Italy has lots of death cases because they never recovered financially like other countries with their money situation. That severely weakened their healthcare system to be able to effectively handle something like this. In other words they were hanging on before the virus thing happened and this put it over the edge.

All retail centers across the board are not going to sit completely vacant. That is just silly. Tenants can be broken up into mom and pop (single and multi-unit operator), small franchisee (single and multi-unit operator),large franchisee (typically 50 units or more, regional corporate brands( investment grade or private credit non-rated), national brands (investment grade or private credit non-rated).

Outer retail center locations on the fringes made up of mainly mom and pop tenants can get crushed because those types of tenants have few reserves and need the money and profits each month to thrive. For those types likely rent concessions from the landlords for a few months hopefully then this blows over. The landlords might also try to go to their banks for loan workouts placing a few months mortgage payments on the back end of the note.

Tenants, landlords, banks all do not want to take permanent big losses and go down when a workout if everyone is working together and fairly can get most through these tough times. Value investors tend to love end of the world situations with properties because then they can buy on the cheap and try to create more equity on the eventual upside. I think it will be like times before where everyone predicted a huge default wave but then many investors were competing for actually the few that did and the rest did a workout and bounced back just fine.

Worst hit retail centers likely cold belt states in weak suburban to rural areas. They do not have much business anyways with net migration moving away and now with people not going to their businesses that is like double trouble.

Medium to large corporate businesses saved lots of money from the last downturns of 9/11, and 2009. I see large apparel type places getting really hit hard versus necessity based and experiential retail. In times of a cash crunch not many want new clothes or shoes. They spend money on essentials and then entertainment type activities to life their spirits. Large corporations with thousands of locations aren't just going to walk away from everything and say (gee whiz) the virus thing took out our business built up the last 50 years. They have lots of money in the real estate and capital of the businesses. Some businesses will fail but also a re-emergence can happen from this event where more people want to start new businesses and work for themselves versus depending on a company they work for to have income.

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