What will be the impact of the Coronavirus crisis on real estate?

680 Replies

How will the actual crisis impact the real estate market in your opinion?

The fact is that , justified or not, the crisis has already hit many businesses including hospitality & tourism, transportation, financial markets and other businesses will be hit due to the problems in these sectors, regardless of the continuous outspread of the virus. (Please stick with the question and avoid your personal opinion if the fear is justified or not. Thx )

As an investor, will you keep investing this year? How do you think the prices will evolve this year?

A friend of mine was in escrow. He told me he cancelled today because he's convinced he can buy the same property much cheaper 6 months from now. Thoughts?

@Kevin Lefeuvre great question and obviously no one knows. Here's my dart at the board:

ultimately nothing. It will create both a demand shock ( yikes I don't want to buy right now) and a supply shock (yikes I should wait until this blows over to sell) which is unusual--it won't force the hand of either buyers or sellers.  

So, we have kind of a pause till there is a new normal--a few months?--until the warm weather hits and things continue much as before. 

Anyone?

@Kevin Lefeuvre lets say there is an extended economic slowdown and stock market keeps tanking. We already have cheap money so there is some cushion for layoffs etc. and real estate will be perceived as a better, safer bet than stocks.

High end stuff could get hit hard, but feels like there is a correction underway there anyway.

Originally posted by @Jonathan R McLaughlin :

@Kevin Lefeuvre lets say there is an extended economic slowdown and stock market keeps tanking. We already have cheap money so there is some cushion for layoffs etc. and real estate will be perceived as a better, safer bet than stocks. 

High end stuff could get hit hard, but feels like there is a correction underway there anyway.

I agree that stock markets and real estate have different behaviors and sometimes even opposite for the reason you mentioned.

As for the earlier comment about less sellers; well inventory was already low. But in crisis situation some sellers HAVE to sell. Even more than now. My 2 cents.

 

My multifamily investments are still cash flowing with minimal if any impact, and I'm about to invest another $100K in a syndication of a couple of multifamily communities in San Antonio.  I sleep much better with my assets concentrated in real estate than I would if they were in the stock market.

Why wait? Invest when the market is stale or slow before it heats up come Summer time. I haven't seen it impact here and supply is still at an all time low with demand high. In any time period you can use a reason to halt or not invest. Just go for it, obviously do your due diligence 

It's already had a huge impact as rates are at historic lows.

I'd be concerned if I were in the flipping business. There's a decent change the nest egg that your end buyer was counting on for down payment was sitting in equities and took a big hit the last 2 weeks. I don't think there will be any significant damage to the market though. 

I don't see it having any impact on residential investment properties. Of course, I don't believe we'll see any more deaths from it than we do from the flu in a typical year. If that turns out to be a false assumption, then all bets are off. If I were buying hotels or retail centers with percentage rent leases, I would be very worried about my NOI this year. It's the panic and irrational behavior that is hurting the most right now, and I just don't see how that is going to flow through to residential investments. Well, I guess we're getting better rates because of it. I'm not sure what impact it will have on CRRCs or MOBs, but I think that's worth thinking about.

@Kevin Lefeuvre Well CNBC reported that the flow of foreign money into US real estate has picked up because it is seen as a safe haven. Don't know how much of that is residential but I would believe a good percentage is MF. Think back to the ‘end of the world' scenario during the Great Recession and what has happened since then. Everything financial goes in cycles but ultimately works its way back up (except for tulip bulbs)

@Kevin Lefeuvre it could permanently alter the way we do business. Hundreds of conferences have been cancelled. Hotel rooms cancelled. Airplane travel cancelled. The impact to cities that rely on tourism and conferences could be substantial. It is not just the businesses, but the people who work at these places. They own houses, rent apartments and rent houses. When they lose their jobs, it will impact real estate in these markets. So the idea that real estate is insulated from business and stock market troubles is not true. 

Positive impact, with the stock market fears and people rushing to bonds, it has pushed 30 year mortgage rates to all time lows. Good time to refinance.

In my opinion there will be a stock market buying opportunity. Of course this isn't popular on a real estate forum. The reality is very often buying when others are selling is the best move. It is called contrarian investment strategy. It works for any asset class that is poised for long term recovery. Just stay away from investments that could end up bankrupt like airlines. 

With coronavirus at community level, there is little hope for containment. Most likely it will be around for years and infect most of the population. As more people get infected and recover, new cases will drop. People will get used to it and the fear will subside.

In a year, probably no impact. Short-run there may be a reduction in buying activity due to fear. Any long-term protracted impacts would have to come as a result of the collapse of some other market which couldn't handle the relatively short-run impact that the virus will have. 

I believe the real estate market normally will follow the downward spiral of the stock market. RE normally lags behind stocks. Feds seem to want to keep rates low, so low banks can't handle the volume of people jumping on it. When rates go down prices go up, people have more buying power. 

Either way buy for cash flow, use conservative numbers. Residential market seems to be high near me. If it is not a good deal, don't buy it. Consider class B. During a recession class A tenants moves down to class B properties. They can live without the pools and the gyms. Class B is good place to B. 

Thousands of people died last year to a regular flu compared to 11 so far with the Corona Virus - I believe it's a bit over hyped and will die over in the next year or so. I don't see too much of an impact so far. 

I would imagine anyone with an Air BNB business model could suffer. Tourism has been decimated. So, if someone has high overhead on those STR's they could be in trouble.

Landlords could be in trouble if their tenants are impacted in their careers or health, an uptick in late rent and or evictions. 

Interest rates are low, won't be much that can be done to prevent them dropping to prop up the economy and inflation follows. I don't think the US is prepared in regards to how we handle health care or paid leave, it could get ugly. 

The lowering of rates helps charging the real-estate market up.

The implications of a long-term effect of the economic slowdown from the virus effecting the bottom line of companies is possible.

The persistent lack of demand of middle income S.F.H housing is still real and not being addressed from builders and such for several reasons.

These factors will keep housing prices strong for the future how long is the 64k question?

@Kevin Lefeuvre

Similar to SARS in the early 2000. Limited short term impact. COIVD is killing between 2.5-3.4% of infected population.

If this bug was killing 25% of the population, we would be in big trouble. Even in multi family. Tough to rent places if the population dissapears.

The coronavirus probably isn't as deadly as we're fearing but there will certainly be interruptions to the work force and our general lives. Forced quarantine or state of emergencies could impact tenants ability to work and their ability to pay rent. If it became a huge problem and all of your tenants stopped paying rent, I'm fairly confident you could make some mortgage modifications to get you back on track. A lot of lenders were doing these kinds of things in the 2008 crash. 

@Jay Hinrichs might have some good input on this because he was right in the thick of things during that time. 

Originally posted by @Ronald Starusnak :

The coronavirus probably isn't as deadly as we're fearing but there will certainly be interruptions to the work force and our general lives. Forced quarantine or state of emergencies could impact tenants ability to work and their ability to pay rent. If it became a huge problem and all of your tenants stopped paying rent, I'm fairly confident you could make some mortgage modifications to get you back on track. A lot of lenders were doing these kinds of things in the 2008 crash. 

@Jay Hinrichs might have some good input on this because he was right in the thick of things during that time. 

it took a while during the GFC but yes mortgages were modified by the millions. I don't think we will see anything like that of course.. but I find it interesting over the last few years every one posts about a real estate bubble and the coming recession.

and many answers are we have no clue what could cause that.. who would have thought of this Virus 1 year ago.. yet its going to impact some regional or local economies it already is.. the big  10 day event in Austin TX was just cancelled that brings in like 400 million.. and many conventions have been cancelled in Vegas and Orlando.. so its having an impact even though we only have 250 out of 300 million people affected.. Or as of yesterday only one or two people in Vegas affected out of 2.5 million that live and work here

 

@Tim G. In the Airbnb business and I expect it to hurt business for 90-120 days. Investors who didn't keep reserves and live paycheck to paycheck will sell or be foreclosed on. I expect to pickup a couple distressed properties due to this.

Not to alarm anyone needlessly, I was listening to an Ivy League Dr. recently and he said, here is the basic math coming, 40% to 60% of population will get the virus and millions will die from it. Hopefully he is mistaken. Not sure how this impacts your local real estate market as I think most of those deaths will be outside USA. I was at Disneyland about a month ago, I was thinking maybe of cancelling. Today I would cancel that visit. I think some of those type businesses where travel or hotel is part of it will be impacted the most and or at least double digit % loss effects. Those areas with existing housing shortages might not see any impact still. Good luck! 

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