The Effect of Coronavirus on Real Estate
The Effect of Coronavirus on Real Estate is significant, and it’ll likely get worse before it gets any better. The effects of coronavirus on real estate will also vary by market and the ultimate effects will depend on the ultimate duration of the economic shutdown. The sectors that have been hit hardest by coronavirus have been Hotels, Restaurants, Retail (think shopping malls, strip centers, etc) with retail sales and new construction following closely behind.
The effect of coronavirus on real estate includes new home construction and remodeling. New construction has seen a 22% decrease, which is the biggest decrease since March 1984 according to MarketWatch. Partly due to a decreased supply of materials normally imported from China (which account for more than 30% of the materials), and as more and more workers stay home, along with social distancing guidelines leaving people fearing contact with others, fewer consumers are hiring contractors for home renovations.
New home sales have also seen a decrease of 15% according to MarketWatch and there has been a huge surge in mortgage delinquencies, and homeowners taking advantage of forbearance agreements, with more than 2.9 million people now delinquent on their mortgages, which is 5.5% of all US mortgages as of April 16. This equals about $650 billion! Not to mention, potential buyers who have a debt-to-income(DTI) ratio higher than 45% and/or who are self-employed, are now having a much more difficult time being approved for a mortgage as guidelines become more strict, according to Forbes.
The effect of coronavirus on real estate has also been largely impacted by guidelines put in place by National Association of Realtors (NAR) as well as many of the local boards of realtors. This has caused a large decrease in overall home showings, which was a large contributing factor to the huge decrease in home sales.
Furthermore, with the huge amount of layoffs and unemployment applications, this will inevitably lead to a decrease in consumer spending, sparking a spiral effect leading to the economic downturn, for which our economy is already seeing a recession. And as we are entering into nearly unprecedented times, many expect the effect of coronavirus on real estate to be worse than the financial crisis of 2008. The after-effects of which will lead to another surge in both foreclosures and short sales. Which, for most investors reading, this also represents an increased opportunity.
The Effect of Coronavirus on Real Estate will Differ by Market
Markets vary by region. As will the effect of coronavirus on real estate within those regions. More affluent areas with largely wealthy populations like New York, Southern California, Miami, for example, will not necessarily be as affected as lower-income areas. Considering the median US income is roughly $63k, it stands to reason that the effect of coronavirus on real estate will be widespread, affecting most of the US population and housing markets. While this is bad news for most homeowners who have been negatively affected by the coronavirus “pandemic,” historically, recessions have provided an opportunity for smart investors to create more wealth, while at the same time increasing the economic divide between the rich and the poor.
The Effect of Coronavirus On Real Estate Investing
For real estate investors, the results of the coronavirus pandemic represent opportunity, both short term, and long term. Now, more than ever is the time actually double down and increase your marketing efforts. Trever from Investor Carrot elaborates on this and has even outlined an action plan. While many people are retreating, looking to government programs for income assistance and relief, there is a large group of people who see the silver lining and are using this as an opportunity to come out of this crisis better off than when it started. For Real Estate investors, the effect of coronavirus on real estate is actually a positive. Although that might sound slightly inconsiderate of those negatively affected, it is an undeniable fact.
Think of it in terms of being the Yin to the Yang. If the universe is governed by a cosmic duality, by which for every action, there is an equal and opposite reaction, and those who find the opportunity in a negative situation represent one of the two opposing and complementing principles observed in nature.
Now is the time for Real Estate investors to increase marketing efforts more than ever. Many people are facing uncertain times, and are looking for a solution that real estate investors can provide. Real Estate Investors, and wholesalers alike, actually provide a great service to homeowners who need a quick solution. Don’t think of it as taking advantage, rather providing a needed solution for a negative situation. If someone is facing difficulty and need to sell their home due to the impact of the coronavirus, you can provide that relief, benefiting both parties and providing a quick solution to those who need it.
How Investors can advantage of the negative effect of coronavirus on real estate
Increase Marketing – While this may seem obvious, now really is the time to increase your marketing. The more people you are able to offer your services to at any given time, the better results you will get. This, more than ever, holds true. Double down, even triple down. The results will be exponential.
Adjust Your Approach – Add new forms of marketing to increase contact with sellers, and in turn increase conversion and deals. Start using alternative marketing methods. Don’t stop what you were already doing, rather, add new marketing methods such as voice broadcast, and targeted list based Facebook ads. Just because you are increasing your marketing, doesn’t mean you need to exponentially increase your marketing costs. Voice broadcast provides a very efficient and cost-effective way of reaching a large number of people for fractions of other marketing methods. In fact, you can reach a seller for a fraction of a cent using voice broadcast. List-based Facebook ads ensure that you are marketing to a very targeted audience, and not wasting ad spend on people who don’t meet the criteria you are looking to target.
Get Creative – Get more creative with your marketing. Think of what unique lists you could build by stacking data that would yield a highly targeted list of potential leads based on the current situation. This means adjusting not only your marketing methods but your message as well. Now is a good time to adjust your SEO and PPC keywords, because people are searching for solutions relating to current events, particularly the effect of coronavirus on real estate. So, if you make the necessary adjustments to your SEO and PPC keyword campaigns, you are more likely to have those searching to find you.
Utilize Quality Data – Make sure your lead list data provider has accurate data and contact information. It might be worth looking for a new source of data, and/or revising the list that you are marketing to. Now is the time to really focus on creating a stacked list that yields a more targeted audience. The better the data you start with, the better the ROI on that list, and the higher conversion. If you are buying lists that don’t come with contact information, make sure you single or batch skip tracing provider can provide accurate contact information as well. If you build a great list but get inaccurate contact information, well… you get the point.
Be Sincere – Although this holds true at any time, now more than ever, is the time for you to be sincere and understand that this is an extremely difficult time for many of the people you will be reaching out to. So, keep that in mind when reaching out to sellers. It’s not just about getting a deal one and making money. It is about providing a service to those in need.
What is to come as a result of the effect of Coronavirus on Real Estate?
The effect of coronavirus on real estate is impacting both supply and demand. For demand, what lies ahead depends largely on how quickly the pandemic is resolved, resulting in a slow return to normalcy, as consumers begin to start spending, resulting in an upturn in the economy.
Supply, however, may take a bit longer to recover. Especially if the pandemic is not contained quickly, causing more of a lengthy return to economic stability.
Inevitably, at some point, there will be an increase in demand from people who were restricted to go out and make purchases, as a result of the lockdown. This will result in a stimulation of the overall economy, resulting in an increase of both demand for and supply of… well, everything… Including Housing.
The duration of the economic downturn as a result of the coronavirus pandemic will determine how long, and in what ways, the real estate markets will continue to suffer.
Back to the Silver Lining, as we saw in the last economic recession, savvy real estate investors will find opportunities to purchase properties from distressed homeowners and take advantage of the lower financing rates to buy homes from people seeking a quick solution to avoid foreclosure, as well as the eventual increase in the amount of foreclosed properties and short sales.
If you have any questions, or want help with your marketing, or are looking for quality data, or consulting on your overall real estate investment and wholesaling business, feel free to schedule a free consultation with us.