Weird time to buy real estate? For sure! Smart time to buy real estate? Early indicators are saying yes. Now that the dust has settled a little bit, we are able to better understand the effects that the coronavirus has had on the real estate industry so far. We’ve listed four things we think you should know if you’re interested in investing in real estate today:
1). Real estate is still moving!
According to a report from Zillow, web traffic to for-sale listings online has risen to levels comparable to past spring markets with real estate showings, both virtual and in person, picking up week over week since mid-April. This rebound is a 39% growth from the decline in the end of March. [ShowingTime].
The real estate industry adapted quickly to the changed environment and moved to:
1). Virtual tours of listed real estate
2). Virtual meetings with buyers & sellers
3). Car closings
While it may not be the same, you are still able to buy and sell real estate in a way that keeps both you and the people around you safe.
2). One is not like the other:
Understandably, many people are wary of making any big financial decisions because of the uncertainty of the COVID-19 crisis and how the stock market has been reacting to it. But, despite what many people believe, there is not a direct correlation between the stock market and the real estate market.
It’s important to remember that the economic situation that we’re in today is very different to the 2008 financial crisis. What we’re seeing today is a direct result of the uncertainty of how the coronavirus may impact supply chains and job security with thirty-three million Americans now on unemployment versus the 2008 financial crisis that was caused by issues in the sub-prime lending market.
During that recession, “sub-prime mortgages were bundled up and sold for much more than they were worth. Ultimately, real estate speculators let homes financed by these mortgages go into default, and these bundles of mortgages—called credit default swaps—lost most of their value, bankrupting large investors and starting a domino effect that rippled through all aspects of the economy”. [Bigger Pockets 2020].
More about the 2008 financial crisis and Lehman Brothers here.
3) Real estate and past pandemics:
Another study that Zillow conducted on housing during previous pandemics concluded that while home sales dropped dramatically during an outbreak, home prices stayed about the same or suffered a slight decrease and experts are saying that if the coronavirus does follow suit from past public health issues, real estate will be in a position for a strong rebound once normal activities are once again permitted. In short, previous pandemics have simply put the housing market on pause, although no pandemic in the last 100 years is truly comparable to the coronavirus pandemic due to the massive shut downs and shelter in place mandates.
Because of the coronavirus crisis, we are heading, or are already in a recession. Again, despite what many people believe, recessions usually don’t mean a bad thing for the housing market because there is such an essential need for it. “ATTOM Data Solutions, a leading real estate data provider, looked at home prices during the five recessions since 1980 and found that only twice—in 1990 and 2008—did home prices come down during the recession, and in 1990 it was by less than a percent. During the other three, prices actually went up”. [Curbed 2019].
4).New opportunities to create wealth:
If demand and consumer confidence remain high, opportunities to refinance existing properties and to move forward on new purchases with lower interest rates will continue, resulting in you saving thousands of dollars in interest paid. Check out this example below:
Ultimately, it will depend on how well we continue to respond to the crisis and how long it lasts to be able to really see the long term impact on the housing market, but for now, we remain hopeful.
We hope everyone is keeping their spirits high and staying safe and healthy.
One last thing.
Tired of the hype of the stock market, only to get burned? Direct your IRA funds into real estate that you can buy or build.
With the extreme volatility the market has been experiencing the past couple of months, not a single client of ours has incurred a loss of value to their SHIRA™.
In fact, according to a report from Zillow, real estate increased in value an average 5.46% in 2019 nationwide, along with the asset protection of their SHIRA™, possible rental income, tax benefits, and the intrinsic value of occupancy of the property, our clients enjoy confidence, peace of mind and growth with their SAFE HARBOR®-Directed IRA™ (SHIRA™) real estate investment and its bottom line.
We help people multiply their IRA funds by directing them to purchase or build real estate that they can personally use or create an additional income from, so that they can have more flexibility and freedom in their retirement, as well as create certainty and security for their families and leave a larger and more impactful legacy. Get the free guide to understanding our unique IRA real estate investing strategy here.