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How will Coronavirus affect the Real Estate Market

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LightningHelix

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Just looking for a few opinions.

How do you guys think the real estate market is going to be affected by Coronavirus?

I've heard that Real estate usually trails economic effects, is there a month window or so after we hit bottom on investments, that we will see the bottom of real estate?

Looking for a good opportunity to get into income properties, but I know several of you are much more experienced in this than me.
 

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MoneyDoc

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Just looking for a few opinions.

How do you guys think the real estate market is going to be affected by Coronavirus?

I've heard that Real estate usually trails economic effects, is there a month window or so after we hit bottom on investments, that we will see the bottom of real estate?

Looking for a good opportunity to get into income properties, but I know several of you are much more experienced in this than me.
The market in Canada is actually rising because of the virus. More people are "fleeing". However, I expect a very big correction as soon as everything is settled down in a couple of months. The market prices are absurd. Top investors are not buying anything.
 
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LightningHelix

LightningHelix

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The market in Canada is actually rising because of the virus. More people are "fleeing". However, I expect a very big correction as soon as everything is settled down in a couple of months. The market prices are absurd. Top investors are not buying anything.
Thats surprising.. You think there is any reason why the virus would cause an increase in price?

Do you think it's the same for United States?
 

MoneyDoc

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Thats surprising.. You think there is any reason why the virus would cause an increase in price?

Do you think it's the same for United States?
My uncle is a real estate investor and he says people are literally "fleeing" from China and Iran. Most are coming to Canada or are trying to get their families to Canada. Not sure how credible this is but he's a big time player in Canada's market. With that said, prices are extremely high and do not make any sense at all. The one's in the "FOMO" stage are buying, which in my opinion is a big mistake. 30 year old homes in good areas are selling for $200k over asking. Does the area warrant that much of a price? Hell no. Even land prices don't make sense. The ones developing now are doing so because they've purchased the land years ago. In my city, I don't know of one developer that has recently bought land to build.

Not sure about the US market.
 

Bekit

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With that said, prices are extremely high and do not make any sense at all. The one's in the "FOMO" stage are buying, which in my opinion is a big mistake. 30 year old homes in good areas are selling for $200k over asking. Does the area warrant that much of a price? Hell no. Even land prices don't make sense. T
Maybe people who are pulling money out of the stock market are putting it into real estate?
 

biophase

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Personally, I think real estate will begin to decline. However, we won't see it begin decline until 6-8 months from now because sellers are usually oblivious to market changes. They will keep their asking prices up until the properties sit for a long time. Then eventually they will start to lower prices as their real estate agents begin to tell them what the market is doing.

I think investors who've been there and done that will wait and wait. Everything is so uncertain now. I'll probably wait at least until 2021 to do anything now.
 

MoneyDoc

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Personally, I think real estate will begin to decline. However, we won't see it begin decline until 6-8 months from now because sellers are usually oblivious to market changes. They will keep their asking prices up until the properties sit for a long time. Then eventually they will start to lower prices as their real estate agents begin to tell them what the market is doing.

I think investors who've been there and done that will wait and wait. Everything is so uncertain now. I'll probably wait at least until 2021 to do anything now.
I'm 100% with Kenric on this. I really feel like the end of this year we'll see a decline. Stress test for mortgages is getting easier this April in Canada, so prices will be on the rise and again, FOMO will kick in literally forcing buyers to buy.
 

DaRK9

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My uncle is a real estate investor and he says people are literally "fleeing" from China and Iran. Most are coming to Canada or are trying to get their families to Canada. Not sure how credible this is but he's a big time player in Canada's market. With that said, prices are extremely high and do not make any sense at all. The one's in the "FOMO" stage are buying, which in my opinion is a big mistake. 30 year old homes in good areas are selling for $200k over asking. Does the area warrant that much of a price? Hell no. Even land prices don't make sense. The ones developing now are doing so because they've purchased the land years ago. In my city, I don't know of one developer that has recently bought land to build.

Not sure about the US market.
That’s interesting considering how they handled SARS.
 

mikemiller

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Hi,
The coronavirus will bring a great impact when it comes to the real estate industry. I recently went through this blog which was very useful. I hope it helps you too!
 

TFF123

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Money has to go somewhere. It has come out of the stock market... and initially went to bonds. But now bond yields are almost non-existent and bank rates are just as bad.

For those (few?) without financial struggles, I'd expect them to be eyeing up property markets in the next few months as forced sellers begin to emerge.
 

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MooreMillions

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I am curious as to how this pandemic will divorce banking from real estate and commercial real estate from corporations not involved in real estate.

Almost 20 years ago I informed my employer, via a focus group, that teleworking is the future so why not start now. It was a logical progression to me because I was consulting homes and small businesses on installing cable, dsl, satellite, and VPN’s.

They heard me, but shrugged it off due to it not being imminent. Well, now it is imminent. Google has led the way, with Twitter close behind, on employees working from home indefinitely.

Once high speed hit homes, I was wondering why companies would not want to take the rent money they pay to landlords every month and reinvest in remaining parts of the business.
At minimum it is tens of thousands of dollars every 30 days to pay for employees not being there a minimum of a 3rd of the time plus weekends.

Why would any business in a capitalists society pay for something it just doesn’t have to? Kickbacks?
Just my thoughts.
 

Devampre

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I'm watching the prices of many properties in my province in 5 different areas. Still haven't really seen any large changes to any listings just yet.

I am kind of hoping to find a good deal for myself.

One thing that was crazy to me (a noob) was the price difference between two properties in one of the cities.

There's a single two bedroom condo unit for $1.1 million and a two bedroom trailer home for like $25,000. I understand the differences and a bit of the "why's." However, from a fundamental perspective as a means of shelter, this kinda blew my mind. Especially since both are in low crime areas and the trailer home is actually closer to the University.

I don't claim to know everything or all the details, but I just thought that was interesting.
 

JScott

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I wouldn't trust any real estate data in any markets right now. Real estate markets are tremendously inefficient, as there are a lot of buyers and sellers sitting on the sidelines waiting for things to open up again. When markets are inefficient, you can't rely on values to be accurate.

Once things start to open up again, we'll see where values move. For residential, I expect that that there will be less inventory than expected early on after we start to open, with a decent amount of demand. That should keep prices propped up for a few months. After that, it will depend on where the economy heads, in general.

Right now, most real estate indicators are strong -- foreclosure rates are low, forebearances are about 25% of where they were anticipated to be, mortgage debt is at reasonable levels, and lending is starting to loosen up a bit. That can change further down the road, but short term, things are probably pretty resilient.

As for commercial, office space is going to have a rough time, retail is likely to have a rough time, and hospitality (hotels, for example) is likely to have a rough time.

Multi-family will likely be pretty resilient, unless the economy really tanks. We'll see risk premiums rise, leading to slightly higher cap rates, but all other indications are that multi-family won't see a major downturn until things start to snowball.
 

Action Mike

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I wouldn't trust any real estate data in any markets right now. Real estate markets are tremendously inefficient, as there are a lot of buyers and sellers sitting on the sidelines waiting for things to open up again. When markets are inefficient, you can't rely on values to be accurate.

Once things start to open up again, we'll see where values move. For residential, I expect that that there will be less inventory than expected early on after we start to open, with a decent amount of demand. That should keep prices propped up for a few months. After that, it will depend on where the economy heads, in general.

Right now, most real estate indicators are strong -- foreclosure rates are low, forebearances are about 25% of where they were anticipated to be, mortgage debt is at reasonable levels, and lending is starting to loosen up a bit. That can change further down the road, but short term, things are probably pretty resilient.

As for commercial, office space is going to have a rough time, retail is likely to have a rough time, and hospitality (hotels, for example) is likely to have a rough time.

Multi-family will likely be pretty resilient, unless the economy really tanks. We'll see risk premiums rise, leading to slightly higher cap rates, but all other indications are that multi-family won't see a major downturn until things start to snowball.
Thanks J, as always great insight and information.

It seems like the market right now is still good for doing retail flips if you get through the process and not take too long, I know it depends a lot on your individual market but in general do you still see this as a good time for flips?
 

MJ DeMarco

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I can't speak for other markets, the inventory in Arizona is drying up. It is keeping prices high.

I could probably sell my house and make $100K on it after just a few months of ownership.
 

Roughneck

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I can't speak for other markets, the inventory in Arizona is drying up. It is keeping prices high.

I could probably sell my house and make $100K on it after just a few months of ownership.
I'm on the outskirts of Sydney, we are seeing similar. Market seems to be relatively strong at the moment, low end stock seems to be moving pretty quickly with little discount, if any. Even a good amount of higher end property has been selling pretty well. We have been considering selling our place, capitalise and move onto our next project.

The government has brought out incentives to help both the building industry and property market keep afloat.
 

elusive97

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Currently selling my house in the UK. The guide price was set in March, lockdown started a few days after the property was on the market. Recieved offers 15% lower than the guide price , ended up accepting an offer 9.3% lower than the March guide price (in early June)
 

Envision

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I think alot of people are forgetting how much cash institutional investors are sitting on. The trillions that were pumped into the economy are masking the damage that was actually done. But thats not to say that there won't be winners when this all shakes out.

If you buy with good fundamentals. Looking at location, cash flow, and long term (Without over leveraging/betting on appreciation) you should be okay. But if your tenants are a couple of people susceptible to a down market your just as screwed as they are if they cant pay.

With that being said, im liquidating some of my residential property to move into commercial (warehousing/storage). I remember my dad told me that there would be 2-3 times in my life to take advantage of a cycle that would compound wealth not seen in "good" times

I think we're about 6 months out from that. I bought a duplex in 2017 for 260k and today its market rate if 500k - numbers are so blown out it's hard to comprehend whats going on but thats what makes me think this cant last forever
 

mon_fi

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I ll speak of my country as i dont know about others: Belgium.

Difficult to say, but i'd vote for down. Most companies will not have as much office space as in the past, and i think offices will be transformed into housing. More housing means prices going down. Also, since people won't have to stay in big cities, they ll move back to the country side or to another country. The financial precarity of the middle class and the new cheap rents will.not be an incentive to buy.

So, in big cities: both rent and real estate value will decrease.
In medium/cities in the "nature": the opposite, rents and real estate will slightly increase.
Big cities in south-east asia/south america/eastern europe/spain and portugal: rent is going to explode as everyone who will work 100% remote will move there.
 

rockit11

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I can't speak for other markets, the inventory in Arizona is drying up. It is keeping prices high.

I could probably sell my house and make $100K on it after just a few months of ownership.
I'm not sure if it applies to AZ, but in my area in VA, inventories are dried up because a lot of people pulled their homes from the market when COVID hit, which actually drove prices up due to limited supply. I'm sitting on some cash and waiting, even though it's tempting to improve property to increase cash flow right now
 

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Tilos

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Realtor and Investor here in OKC. Properties are being sold like hot cakes (around $140K-$180K). I've seen residential homes sold at $145/sq ft when it should be around $120. It's definitely a seller's market here.

Not sure about the Multifamily sector here. I know that in TX multi-family is pretty popular in the last year or so.

Staying the course and enjoying the ride.

Cheers!
 

rocket99

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I can't speak for other markets, the inventory in Arizona is drying up. It is keeping prices high.

I could probably sell my house and make $100K on it after just a few months of ownership.
I live in Arizona, too. It's a seller's market big time. We have the lowest inventory currently since 2005. I sold an investment property last month. I got 8 offers in two days. All over asking. It fell through the day of closing due to problems with the buyers loan. Put it back on the market and got 6 offers $10k-$15k over asking the first day. Real estate is hyper local though. Each state is very different.
 

JScott

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Not sure about the Multifamily sector here. I know that in TX multi-family is pretty popular in the last year or so.
We just got a 152 unit property under contract in Houston. Originally had it under contract for $22M back in February, let it go due to Covid, and renegotiated last week at $20M. Newer investors are sitting on the sidelines, leaving some good deals out there. And with multi-family investors slowing down, there's lots of institutional money looking for a home right now -- so raising money is easier than it's been in a while.
 

foodiepersecond

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We just got a 152 unit property under contract in Houston. Originally had it under contract for $22M back in February, let it go due to Covid, and renegotiated last week at $20M. Newer investors are sitting on the sidelines, leaving some good deals out there. And with multi-family investors slowing down, there's lots of institutional money looking for a home right now -- so raising money is easier than it's been in a while.
Excited to see how this plays out in a future podcast :cool:
 

Tilos

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We just got a 152 unit property under contract in Houston. Originally had it under contract for $22M back in February, let it go due to Covid, and renegotiated last week at $20M. Newer investors are sitting on the sidelines, leaving some good deals out there. And with multi-family investors slowing down, there's lots of institutional money looking for a home right now -- so raising money is easier than it's been in a while.
That’s awesome man! Congrats! Wow, glad to hear y’all got a 152 unit under contract.

I’m making the bridge from
SFH to MFH. Felt like the economies of scale was def better. Been reading Joe Fairless and listening to Michael Blank.

I agree with the post above. Looking forward to a future podcast on that deal!
 

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