Let’s talk Real Estate
China coughed and the world caught a cold. I got that term from a fellow financier and it is the perfect description of recent events with the Coronavirus.
China is the second-largest economy in the world, exporting about 540 products. So, when China couldn’t make and ship out their products, companies and governments suffered. Think about not being able to get your laptops, smartphones, furniture, clothing, plastics, and chicken.
America is the largest economy in the world. It is even more imperative that we are firing on all cylinders. Unlike China, almost 70% of our economy depends on personal consumption; that is, you and me spending money. That is what we do as Americans; we spend money and lots of it. In fact, 64% of Americans own homes yet 69% have less than $1,000 saved. As a finance person, this means opportunity so, let’s talk Real Estate.
Recent decisions to open states have posed the threat of not only an increase in health challenges but increased financial hardship. The real estate market lags behind the stock market. It makes sense, it takes time to view homes, apply for mortgages, get approved, etc.
If you want to invest in real estate, although it is still a sellers’ market, it’s a good time to get your ducks in a row. A recent forecast suggests a 50-60% decline in sales. That would make it a buyer’s market which will force lower home prices.
In April, 1 in 3 tenants did not pay their rent. This can lead to lots of evictions in 6-8 months. If that happens and the economy is still slow, it is going to be hard for landlords to find new tenants to replace the old ones. Landlords who are highly dependent on their investment income will take a hit and be motivated to cash out by selling their properties. Also, if the economy is slow to recover, there will be an increase in home foreclosures. This will lead to more conservative loan underwriting. Banks are already tightening up mortgage qualifications requiring higher credit scores and larger down payments. As a side note, interest rates are currently at a record low.
Of course, it is “wait and see” from here, but if you want to buy a home or investment property, the opportunity seems to be on the horizon.
Food for thought!
Want some direction on how to move forward with your finances, schedule your free Q&A with me, and let’s see if working together is the right move for you. Go to calendly.com/lwilliamfinance