| Hi Taylor
- I'm wondering how this pandemic and the shutdown might affect real
estate. Is it still a solid investment strategy, or should I stay
away for a while? - Stan
Hi Stan - This is a great question as it's pretty likely there
will be some impact on real estate, but it's not clear how hard we're
going to feel it. Unlike the 2008 crisis, our current economic woes
aren't tied directly to the housing market. Instead, buyers and renters
will have to adjust to other factors that influence their bottom line.
interest rates. Rates were low before the pandemic shut everything
down, then they were absurdly low, and now we're bouncing between
pretty low and very low. That's a convoluted way of saying that
it's a solid time to refinance your mortgage. If you were already
looking to buy a property, even if the price hasn't dropped, you
might be able to get loan terms that wouldn't have been available
a few months back. It's a bit of a conundrum as the lowered rates
won't do much, if anything, to alleviate the jobless crunch, but
it does make it easier for those with means to buy property.
2. Tentative buyers. Even with the awesome rates, it's understandable
that the number of interested buyers has dropped. There are plenty
of reasons to be hesitant, among them are job security and an
expectancy that market prices will go down. Since nothing is guaranteed,
I don't think anyone should hold off on buying a house they can
currently afford. The lack of competitive buyers might be more
in your favor than a drop in market value. However, with unemployment
on the rise and industries still shut down, it's hard to imagine
that real estate sales and prices won't take a dip in the coming
3. Renting market. This might be the area of most concern,
because what happens to the renters market usually has an impact
on all sectors. As waiters, bartenders, part-time students, retail
staff, personal trainers, hospitality workers and so many more
look for new jobs or start taking unemployment, we can expect
to see a lot of apartments and rental properties become available.
These vacancies would typically be filled by other members of
the working class, but those prospective tenants are in the same
boat as the ones giving up their leases. The domino effect of
people losing their jobs and moving out of their apartments won't
take too long to reach the real estate market, since renters and
buyers don't have too many degrees of separation.
| We don't know
how deeply we'll feel this economic downturn, or how long it will
last. From a real estate perspective, it's good that the crisis isn't
directly tied to housing, but it would be naive to think the market
will go untouched by this pandemic. Thanks for the question, Stan,
and I hope your investing plans work out!
© Taylor Kovar
May 12, 2020
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