How the Coronavirus Could Impact the American Real Estate Market

How the Coronavirus Could Impact the American Real Estate Market

How the Coronavirus Virus Can Affect the American Real Estate Market

Published on: March 08, 2020 | Updated on: March 09, 2020

No one knows how the corona virus might affect the US real estate market, but that doesn't stop us from trying to figure it out. Here are my predictions.

There is no denying the impact that the coronavirus (COVID-19) is having on the global economy is troubling. China, the world's second largest economy, has had the biggest outbreak with over 80,000 reported cases and 3,015 deaths as of this writing and has suffered the most. The virus has halted production and caused significant supply chain disruptions and economic volatility, and could lead to an estimated $2.7 trillion in lost global output, according to Bloomberg Economics.

Watching China's production and economy output, some people have asked how the coronus virus can affect the US real estate market.

Foreign buyers will grow, at least for a while

Given that China is the largest foreign buyer of residential real estate as of 2019 National Association of Realtors (NAR) activity in the US residential market, accounting for $13.4 billion of $77.9 billion, or 17.2% of the foreign market share, the coronavirus. can greatly affect investor activity, but surprisingly in a positive way.

China's foreign investment in US real estate has recently fallen. Many economists attribute low inventory in the US, the US trade war and China and the dollar strengthening.

But as confidence in their real estate and other foreign markets falters, investors are moving their money into hard assets, such as real estate, in areas like the United States that have so far not suffered greatly from the spread of the disease. Roofstock, a popular online marketplace for real estate investors to buy or sell rental properties, has seen a 450% increase in traffic from Asian countries in the past month.

CRE revenue and growth will slow

In the event of a full blown outbreak here in the US, commercial real estate (CRE) was the biggest hit. Manufacturing and economic activity will slow as people are likely to stay indoors, reducing consumer spending. Default rates on CRE loans will increase and production and development will decrease.

A number of CRE companies and investors are trying to plan ahead by taking increased measures to reduce the spread of the virus, especially in assets that populate or employ a number of people.

Brian Murphy, CEO of private and flexible Breather office space provider, tells me he has already implemented "enhanced cleaning and disinfection process following CDC training to ensure Breather clients are healthy and healthy and reduce the spread of potential virus."

Companies like Amazon (NASDAQ: AMZN ), Google (NASDAQ: GOOGL ), Apple (NASDAQ: AAPL ) and Facebook (NASDAQ: FB ) are also planning to prevent the spread of the virus by asking employees to work from home. While these methods can help, CRE investors should have a contingency plan that they can fall back on in the event that the virus does not contain as planned.

The shaky ground becomes more shaky

The world market and the US economy were already on shaky ground before the outbreak of the coronavirus. I have previously written about a number of signs in our economy that point to a possible recession in 2020. These indicators have only been perpetuated as investor fears about the spread of the coronavirus and the impact on global markets are growing.

The last two weeks:

The Fed lowered interest rates by 05% to 1.25%.

All three major U.S. stock market indices lost over 10% of their value in what was the worst five-day trading session since 2008.

The bond market plummeted, with the Treasury bond yield for 10 years plummeting below 1% for the first time.

The Senate has approved $ 8.3 billion in emergency funding for the Koronov virus.

Clearly, Congress and the Fed fear the strength of our economy. The lowered interest rate will only be useful for so long. While this may encourage lending and capital deployment in the short term, it is unlikely that this amendment will counteract the long-term impact of the virus.

The market will remain relatively unchanged for now

As of today, Saturday, March 7, there are more than 300 reported cases of the coronavirus in the United States, according to the New York Times report. While this number is still relatively low compared to the 327 million people living in the United States, it is spreading rapidly.

Currently, it is likely that the markets will remain volatile with the housing market remaining largely unchanged for the time being. Investors can take advantage of interest rates and the minimal impact on the US economy up to this point. If the outbreak continues to grow, it is unlikely that our economy or residential real estate market will be able to withstand the impact.

Depth of impact depends on how common the virus is

Unfortunately, only time will tell how the coronavirus will affect the real estate market. There is no doubt that the coronavirus will affect the American economy and the real estate market in some way, but no one really knows to what extent.

Many real estate markets in the United States have rebounded from the 2008 recession, but there is a high chance that the continued spread of the coronus virus could be the turning point, bringing the U.S. economy into full recession.

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How the Coronavirus Could Impact the American Real Estate Market

The impact of the coronavirus on the US real estate market may surprise you. Here are three ways its continued spread may affect the housing market.

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