Stock market is down, is real estate next?

Question

Right now looks like a good time to invest in the stock market but my question is will real estate be headed in the same direction as the stock market? Foreclosures? Evictions? Will prices drop? Just interested in hearing the opinions of others.

Michael Haas · Answer

Yeah - the magnitude of the dip makes stocks look pretty attractive UNTIL you look at the crazy run-up we've had and the P/E multiples we're still trading at. Things look a lot better now, but I still don't feel like I'm seeing "bargains" in stocks just yet.

Account Closed · Answer

I agree that flipping is rally risky right now. It will be market by market. Some places like Seattle are heavily dependent on Boeing & Amazon. Boeing is going to need a bailout, Amazon has to change it's business profile but it seems to be doing that.  Another market that will be hard hit is any community that makes automobiles or provides parts for automobiles. Automobile sales are already in the tank.

The hardest hit will be the hospitality sector. Any city or state that highly depends on travel, entertainment & hospitality will probably be hit pretty hard. The airlines have no one flying (compared to normal) so they will have to cut back on staff. Destination places like Hawaii, Grand Canyon, New Orleans, Nashville, Las Vegas, Padre Island, Miami, DC, Charleston, New York City, etc will notice the difference significantly.  Any oil producing area will certainly notice the difference. Oil is around $20 a barrel and becomes profitable at about $40 a barrel. That means a lot of frackers are hurting. When the frackers hurt, the banks that finance them hurt.

The good news is that climate change kills coronavirus and will save the economy.

Jay Levy · Answer

Will sectors of the real estate market be impacted by what's going on in the world? Absolutely.  I would be a bit scared of commercial and retail properties right now.  Retail for the obvious reasons, stores and restaurants will be closing. Commerical will suffer as businesses go under, downsize and business potentially comes to the realization this remote workforce / work from home works (that's assuming it does work).

Other areas of real estate will see opportunity, suburbs outside major cities should do well, multi-family rentals should do well.

Also, I would expect inflation due to all the money we will need to print to pay for this, which typically benefits real estate.

Account Closed · Answer

@Cristian Portillo the government is stepping in to prevent foreclosures etc. which is probably a smart move based on the ridiculous nature of this nasty dip/sell off.  Nobody can know what’s going to happen in this good vs. evil world.  There are many elite forces that make it their goal to crash economies and establish their version of a global agenda.  Right now, there are those trying to do good and work hard, and then there are those trying to speak bad and hope for the markets and economy to crash so they can see a different political candidate in office, regardless of how that may hurt families, young, old, special needs etc.  I never thought the stocks were going to dip this far, and the hype over a virus has gotten feverish, and no one has seen  these extremes in this way.  It looks like it’s a good time to buy, but who knows if sinister powers will prevail for a time?  You will have to feel it out and judge based on what you see.  I guess Monday will be another fear sell off of stocks, and that the hysteria will be promoted by the news for a while.  I think real estate will do good in some areas outside of major cities, like Midwest.  Pray for peace!

Richard Scholtz · Answer

@Kenneth Garrett     Landlords are rich - Like Amazon,  and they get taxed just for foolishly choosing "The Socialist Republic of Seattle"  as a place to do business. No relief for them.

Karl B. · Answer

If the market drops it's going to take much longer to see a drop of any magnitude. And I would venture to guess in pretty much all markets we won't see a 30% drop.

Low interest rates also help buffer a potential drop as more investors/home buyers will want to take advantage of the insanely low interest rate keeping inventory low.

Now... could flippers or new builds potentially be in trouble? Yes - those are the most likely candidates, risk-wise, in my opinion.

Richard Scholtz · Answer

@Kirk R.  Seattle leads the way

City Council President M. Lorena González wants to extend Seattle’s moratorium on residential evictions until six months after the city’s coronavirus state of emergency ends, for some tenants.The city already has an emergency order in place that says many residential tenants can’t be evicted for 60 days or until the emergency is over. The order covers all evictions other than those related to tenant actions that imminently threaten the health or safety of others.González intends to introduce legislation Monday that would allow tenants to use the pandemic as a defense in eviction court. Landlords would be barred from evicting tenants able to prove a connection between their unpaid or late rent and their coronavirus struggles.Her legislation would apply to tenants with unpaid or late rent due to a coronavirus-related illness; reduction in income; loss of employment; reduction in work hours; business or office closure; need to miss work to care without compensation for an immediate family member or child; or similar circumstance.

Keith Maison · Answer

I don’t think that the real estate market will crash like the stock market. I like the property market as it is more stable and is easier to control. And it is less risky as w well. However, stocks have their own advantages as it is easier to diversify them then RE portfolio. Also, stocks can be effectively managed with a more passive approach. Actually, if there are people interested in the stock market and RE market comparison, there is an article they can read to know more.

Hunter Vigneault · Answer

I think the posts above are correct and that the broader market will take months to show the true effects of the recent events. In my opinion, one of the benefits of real estate being fairly illiquid is that you can't keep refreshing your browser to see wild swings in valuation.

On a deal by deal basis, yes - there are already effects on market pricing going forward. When there is a shudder in the market, more people would like to sit on their cash and see what happens. Fewer buyers means less competitive bidding. It is too early for most sellers to want to accept these lower offers, but the longer these market conditions hold, the more accepting they will be. Of course, I have already begun speaking with owners that are less well capitalized and are willing to consider significant discounts from where they were just a few weeks ago.

While I think most owners that have adequate reserves and do not have a short fuse on their existing debt will be ok over the long term, it is difficult for me to say for sure that an adequate refi ability will exist in the next 3-6 months or so. I hope the lending market remains strong and that concern is unfounded, but someone in that sphere would likely be better able to speak to what they are seeing and expecting. Certainly the government seems more willing to step in with relief than they were in years past, but as of this writing I do not know specifically what that will look like.

I am an Associate Broker working commercial real estate in Nashville, and I am currently working with investor clients that are positioning themselves to be ready to purchase. Hospitality and retail are likely to see significant opportunity across the country for investors that are experienced and well-positioned financially, and Nashville in particular has a lot of exposure to that industry.

Kenneth Garrett · Answer

@Richard Scholtz

What happens to the landlords mortgage payments during this time in Seattle?  Are they still obligated to make the mortgage payments.  If he gets relief on the mortgage payment somehow; does the lender report to the credit bureau they were 30, 60, 90 days late?  Not all landlords are wealthy capitalist.  What do you think?

Stock market is down, is real estate next?

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