No sector of the economy will remain unaffected by the “COVID Crash,” and that might be especially true of real estate. Investing in property can be unpredictable even in flush economic times, so the unprecedented enormity and suddenness of the COVID-19 outbreak makes creating realistic forecasts even more difficult.
Even so, professional real estate investors are remaining calm, if not cautiously optimistic across the nation. An example of one of the most robust real estate investment markets in the U.S. is located in America’s 7th largest city, San Antonio. February of 2020 marked the eighth-straight month of home sales growth in the Texas city, but that streak was broken in March as the nation began to deal with lockdowns and other virus mitigation measures.
The professionals providing property management in San Antonio and other cities are working closely with property owners to address the potential loss of rental income due to the pandemic. James Gaines, a Texas A&M University real estate analyst, said all response measures to the virus will “drastically affect the markets” in the coming months. However, the housing market is still “absolutely open for business,” according to Romeo Manzanilla, president of the Austin Board of Realtors. He also says that agents are working to keep business moving by using video conferencing and providing virtual tours of properties for sale throughout Texas.
But while real estate sellers can adapt their practices using connected technology, another obvious challenge will be tight money. In hard economic times, fewer people may risk their money on real estate investment opportunities, which will certainly drive prices down in the short term.
On top of this, many other factors must be considered when considering the real estate market as a whole. Consider that the U.S. mortgage interest rate is in free fall hitting an all-time low in March. According to Freddie Mac statistics, the 30-year fixed-rate plunged to 3.29%– a plunge that one industry observer called “staggering.” The rate was nearly 5% in 2018.
The good news is that a low mortgage rate provides an opportunity for homeowners to refinance and save a significant amount of cash. In fact, many homeowners may be able to switch to a 20-year or 15-year mortgage and still have a payment similar to what they were paying with their 30-year contract.
Jay Farmer is the CEO of Quicken Loans, and he believes that a key factor in returning the real estate investment market to normal is certainty. Stability will return to the markets once a solid idea is obtained about how the COVID-19 pandemic is likely to play out. He said that even if public health experts say the impact will be worse than expected, interest rates will stabilize because more certainty will come as more information is made public.
Another aspect of real estate investment that professionals are paying close attention to is the China factor as residents of China have emerged as a major source of sales in the U.S., especially in New York and California. Chinese buyers laid down $13.4 billion on U.S. properties from April 2018 through May 2019 – but that’s a whopping 56% decrease from the previous year. That drop has only been increased due to COVID-19 travel restrictions, quarantines, self-isolation, and Chinese investors that are simply nervous.
The bottom line still seems to be positive for real estate investment, however, because now is a “perfect time for buyers”, according to Adelaide Polsinelli, an investment broker and vice-chair of Compass. She says that low-interest rates create increased opportunities for buyers which, as a result, presents an increased opportunity for the property investment industry to recover from the COVID-19 pandemic.
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