Top 5 ways that Covid-19 is affecting the real estate markets
Today I’m going to share with you the top 5 ways that Covid-19 is affecting the real estate market for investors and consumers. I can’t even begin to tell you how many people are hitting me up and they’re wondering. “Are you going out of business? What’s happening to the thousands of homes that you’re buying? What’s going on for you, man?”
War on the real estate market!!
Right now, we are literally in the fog of war. People are having a hard time seeing what’s real, what’s fake, what’s true. And the reality is we have never faced a pandemic like this before. Today, I’m going to dive in. I’m going to share with you the facts, the data, the best information out there.
And I’m also going to share with you my opinion on what’s going to happen in the next 6 months. Understand that corona-virus is creating crazy uncertainty in the market. Everyone’s freaking out because we saw the stock market tanked and they’re assuming that the same thing will happen to real estate.
Now, first off, you realize that this isn’t any normal, typical recession, depression. This is government-mandated. This is people’s rights all over the world being stepped on right now. And as we talked about a government-mandated recession, it means that right now we have businesses shutting down because of the government. We have our economy being stepped on because of the government. And as a result, this is not like other recessions we’ve seen in the past.
This data is going to surprise you as I go over the top 5 things that are happening in the world today that are impacting the real estate market because of the corona-virus. And in the end, I’m also going to share with you some super exciting pivots. Things that I think are mind-blowing and cutting edge in the world that we live in for real estate today.
Number one How real estate is being affected by Covid-19 for consumers and investors?
Corona-virus is creating uncertainty in the market. But you need to understand that that uncertainty is very different when it comes to the stock market as well as real estate. For example, the stock market functions on certainty.
When certainty is low, the market tanks. When certainty is low in real estate, the real estate market can’t tank. Why? Because it’s liquid. It’s not as, “Oh, I don’t like the news I hear today. Everyone, hurry and sell your homes.”
Remember the stock market is an idea. Real estate is a hard-tangible asset based on human beings, supply, and demand saying, “Excuse me. I need a roof over my head. And even if we have a recession, I still need to live somewhere.”
Ultimately you need to understand that real estate isn’t purely an investment. It’s actually motivated by people simply wanting a place to hang their hats. So, let’s dive in and understand this: We definitely are in economic winter. We’re experiencing a stock market recession. Does that mean that the real estate market will go down?
Everyone’s freaking out because we saw the stock market tanked and they’re assuming that the same thing will happen to real estate because that’s what correlated in 2008.
ATTOM Data Solutions however recently came out an article in this graphic evaluating the last 4 drops in stock market real estate. And check this out. Backing all the way up to 1980 when we had GDP dropped by 2.2%, guess what happened to home prices? They were up 4.5%. They actually didn’t correlate.
Similarly, just the very next year, 18 months later, GDP – was down 2.7 percent. Home prices were still up 1.9%. But look at what actually happened in 1990 to 1991. We do see a correlation. GDP dropped by 1.4%. And the home pricing market went down 0.9%. They correlated.
So, the time before in the ’80s, they didn’t in the ’90s, they did. Now go with me to March 2001. During this year, home prices were up 4.8% when GDP was down 0.3% after the .com bubble burst.
The bottom line, they didn’t correlate. Home prices were up even though GDP was actually down. But check this out: Right now, 2008, this is what’s on everyone’s mind because 12 years ago, everyone remembers that the home prices actually dropped 13.9%.
One of the biggest drops we have seen since the Great Depression because we had this huge subprime bubble. Something we definitely don’t have today. And GDP also dropped a whopping 5.1%. So, this is what we actually referred to as the Great Recession.
The question right now with this government-forced recession is this a natural recession? And doesn’t mean that real estate has to correlate? Well, we know from looking at this right now that the only correlate 3 out of 5 times.
The question right now is do they correlate now? For you to understand that answer, we’re going to move on to point number tow.
Number tow how corona-virus is affecting the real estate market.
Which is that the corona-virus, Covid-19 actually doesn’t change our shortage in real estate right now.
Freddie Mac came out and said that we are short 3.3 million homes. In other words, we have a caught up from the shortage of the subprime crisis of 2008. After all of these years of building, guess what? We don’t have a ball yet. The stock market might function on confidence.
But real estate functions on basic supply and demand for baby-making. Right? I’m talking about population, immigration. Look at this for the United States. This is showing from 1950 and projected by the United Nations out to the year 2102.
Look at this relation growth curve. Do you know what this means? This means that real estate prices have to keep going up. And when there’s a shortage, we have to build more. So, while we have this government-mandated recession, you need to understand that real estate might be on pause in some areas. Real estate could even slow in some areas.
But ultimately, what happens once we get in control of the corona-virus? Before coronavirus hit, Fannie Mae came out and said in 2020, we have a significant increase in the forecast. How much? After increasing just over 1% annually this year, growth in the same family housing starts with accelerates up to 10% during 2020. Going from 1 to 10 percent…
I mean, this is astronomical huge growth. And the reason why they’re predicting this is that they know that we’re missing 3.3 million homes in America. You can’t have a bubble burst if there’s no bubble. In fact, it’s the opposite.
We actually need to build more. By the way, if you’re really liking the information that you’re getting right now, do yourself a favor and actually subscribe to this blog. Every day, I come out with brand new posts designed to help awaken your financial genius and make the best financial moves for your financial future.
Number 3, pandemics pause real estate. But does it snap right back? The reality is we got to look back at history and see what we can learn.
Recently, Zillow came out with an article and they looked at what happened to Hong Kong in 2003 when SARS hit it really badly. Essentially, what they’re showing here is the correlation between what happened with SARS and the volume of real estate transactions versus the pricing of real estate.
And you know what they found, they found that immediately, the yellow line right here in the middle once it hit, volume transaction dropped initially.
Because people were doing their version of social distancing back then. However, after a short period of time, look at what happens. Real Estate’s snapped right back. Volume kicked right back up and people were back to real estate investing. At the same time, if you look at the blue line, you can actually see that real estate in Hong Kong was already trending down.
And it stayed true to that. Does that actually correlate? No. Actually the volume bounced right back up and prices did what they were doing in Hong Kong anyway.
This is what we call the V trend versus the U trend. In a U trend, the market drops, and then it drops for a while and then eventually swings back up. But a V trend says actually there was an incident where everything dropped.
Let’s call it a government-forced recession and then the moment we got on top of the virus, guess what happened? Boom! Everything snapped right back up. Last week Forbes came out with an article. And what they did is they interviewed the top 5 producing real estate agents.
And here’s what they had to say about real estate and the pandemic. Few economists believe that we’re in for the brutal elongated U that Americans experienced through the Great Recession.
Most predict a more rapid Corona V especially for wholesalers and retail pointing to the speed with which businesses and factories have reopened in China and in South Korea already.
Many of you know that when the Great Recession hit, all of my real estate competition, investors, everyone went out of business because foreclosures were through the roof. For me, that actually represented one of the very best times to be investing in real estate because, with so much product back to the bank, it’s not the government’s job to clean it up. That’s what investors do.
So, I went into the hardest-hit markets like Phoenix and Vegas and we literally bought thousands of homes. Homes that were brand-new and had been selling for a quarter-million, $300,000. I was buying him up for 80 thousand, 90 thousand, 199 hundred thousand, 120 thousand dollars.
And when we talk about that U, it took about 5 or 6 years for the market to catch up. We built up a huge supply and demand problem. And then guess what? The price has shot back up.
And inside those first 5 years, my investors made over 100 million dollars. So, what happens when the government actually lifts its restrictions? I think we’re going to experience a snapback. Is it on pause right now? 100%. Am I still buying real estate during the pause? I’m going to share that at the end of this post.
By the way, my boys love to create stores even though they really don’t have customers. And herewith corona-virus, this is their most recent store taking toilet paper that they did not buy. I’m not sure about the prices. But they’re selling it.
If you want to know how to manipulate the real estate market either as an investor or is it consumer and make the very best choices for the next 6 months, you need to understand point number four.
Number four is the corona-virus producing foreclosures?
Currently, it’s not. In the current mortgage crisis in my opinion is going to be rather a short term. I like Ram. I think he’s got a good head on his shoulders. He goes on to actually say “In his opinion”, that the government will likely continue bailing us out until we actually get through this pandemic. At this point realistically, the Fed just seems like they’re on track to bail out anyone who potentially even needs it.
By the way, please beware of a lot of the media that is out there trying to instruct you on how to do forbearance. The government is not allowing foreclosures to actually take place.
But a lot of people don’t know that they’re destroying their credit by calling up their banks and saving a few bucks by saying, “Hey, please do a forbearance.” If you have to do it please be aware that in 2008 when forbearance has occurred, after the crisis, banks and people viewed your credit as bankrupt.
And many times, it took up to 7 years before your credit was fully usable again. So, please beware of that by the way, banks have been playing super nice with people who have been really negatively affected by the coronavirus. But please, beware we even have YouTubers like Meet Kevin.
They’re out there actually instructing people how to get forbearance’s. He’s super young and hasn’t lived through the cycle to actually know what will happen when forbearance is actually viewed on your credit as a bankruptcy.
Now, by the way, whether foreclosures stay on pause or not really has to do with how long the corona virus is going to last and government’s position on it, I think personally that the government believes that since they’re mandating what we can and can’t do and who can work and who can leave their house, that right now they’re doing everything they can to avoid what will become otherwise mega class-action lawsuits after this is all passed.
People going back to the government saying, “Your choices personally financially hurt me and you need to rectify that.” So, I think that we’re going to see that.
There might be some sectors like vacation homes or Airbnb where homes might get foreclosed on or go back because guess what?
People are staying in their homes; they’re not necessarily going out and vacationing. Just like people are pivoting their everyday lives to adapt to what the corona virus is doing; businesses are doing the same and that goes for real estate as well.
Number five brokers, realtors, and lenders are pivoting the way that they do real estate.
Social distancing means that real estates on pause, right? Not necessarily. New technology like matter port cameras is being used to create virtual walkthroughs.
Literally you can go through this house right here. Zoom in anywhere you want to go and literally check out this entire house, site, and seeing without actually going in and checking out the house.
This kind of innovation, it lights me up because with our technology today, we’re always going to find a way. This is great news. Governor Cuomo of New York actually issued an executive order allowing for virtual notarization. And look at how it’s being used.
“Crisis teaches us to be resilient…”, says Forbes. “…creative and gritty. Where there is a will, there is a way to get any deal done. Closings are still happening. Banks have learned to support and accept desktop appraisals.Real Estate
Coop boards are facilitating interviews through zoom and Skype. And we had one deal closed recently…” Check this out: “…where there were 4 cars in the POC parking lot representing the bank’s attorney, the seller’s attorney, the buyer’s attorney and the title companies masked and gloved running back and forth getting signatures.
That brings me to hope that we can get through this.” While most economists believe that we’re going to see a V and a major snapback. The reality is this type of thinking and then technology produces change where things will never be the same again. Real estate only becomes more virtual and it also only becomes easier.
So, am I out there buying real estate the way I was before corona-virus? Yes. I’m actually getting my hands on as much real estate as I possibly can. Not only did we crush it during 2008. But I know that when a crisis is at a peak, so is an opportunity.
In fact, I’m still finding deals that have 25 to 30 percent ROI. However, I want to be really clear that we have been pivoting hard the last 5- 6 weeks. We’ve been adding more value to our clients, getting more value away, helping more people in their experience of building wealth, releasing business products so that people that lost their jobs can make money.
And we’ve been out there in the real estate game doing as much as we can. Many members of my team, dude, we know what it’s like to put in 8-hour days, 10- hour days, 12-hour days. Some of us 17- hour days to keep on top. Now, fortunately, we’re actually in growth mode and we’re hiring. I know that’s not true of a lot of companies out there.
But that is because we’re doing everything we can to pivot. And this economy right now with this government forced recession is mandating that if you don’t pivot, you might die or your business, metaphorically. What’s going to happen with real estate in the next 6 months?
I’m going to tell you that I’m going to keep buying as much real estate as I can. If this pause lasts too long, you will likely see a lowering of price in a million-dollar home. Maybe even a 5 thousand-dollar home. But if you actually stick to home price under the median, that’s where you’re going to have your greatest safety. I recently looked at the last 4,000 homes that I’ve done.
Not a billion dollars’ worth of a real estate. And we didn’t aggregate look back on all of our real estates, one of the ways that we’ve been protected especially in recessions is that we’re buying so far below the median that we’re still serving the major single-family housing market that is on the rise right now where we don’t have enough assets, by the way, if you’ve ever wanted to get in the game as a real estate investor, there are certain markets you absolutely want to be in right now.
If you want to know if those are, you should click the link below where you can connect this source. For the first time ever, I’m actually giving himself one out. So, if you actually want to connect with me personally, ask other questions about real estate, disagree with me, or connect in any manner, go ahead and click the link below.
You’re going to get all the details of getting the right source. Text them and let’s make sure that you’re as informed as you possibly can be on how to crush it in real estate during this environment. Because make no mistake during economic winter, when people are thriving, they are the leaders for spring/summer and coming fall.
By the way, they sitting a whole bunch of books that are going out the door. All of these books are free. They’re based on their first book, The Straight Path to Real Estate Wealth. People also request this publication for free. In this economy, you need to become more knowledgeable. Knowledge is power especially if you act on it.
So, if you want to get any of their books for free when you click the link below, they start texting just let them know and they going to get one pushed out to you right away. Hey, thank you so much for reading today’s post. If you liked it, do me a favor, share it.
It certainly tells blogs that this is information worth sharing with others. Finance & savings here leaving you with the most important information to make sure you can control, command your own financial future, take it back, and live the most amazing life that you can.
- Read more:
2- Freddie Mac
5- Meet Kevin
7- Kris Krohn