How will coronavirus affect the real estate market?
I was teaching a real estate class yesterday and was asked this question towards the end of class. To be honest, I acknowledged the question, but didn’t really answer it. To be really honest, in my mind, I dismissed the question as silly.
Later last night, when my boys were in bed and the house was quiet, I started to think about this question and began to feel guilty for not answering. And I felt guilty as a business owner and team lead for not considering the question before. I have a team that I lead and that I care for so considering all potential risks in their future is my job.
So how could a coronavirus pandemic affect the real estate market?
First, one should consider wage earners out there who might miss work for an extended period of time because they are sick or who’s workplace may shut down to prevent the spread of the virus. Will those wages be covered by paid time off (PTO) or sick days or might they have to take unpaid days off? A loss of income could affect their ability to have the required down payment to make a home purchase. Or it could cause them to access their down payment savings to simply stay afloat while away from the workplace.
Then I thought about the big national lending firms like Wells Fargo, Bank of America, etc. These are big companies that employ thousands of people, oftentimes in big offices. If a lender’s office was forced to close for a period of time, real estate closings could be delayed for an uncertain amount of time. Pre-approvals requiring verification of income, tax returns, and such could take longer as well. This could be a very good reason to consider a local lender versus a big national company. Smaller lenders may have less risk due to the smaller number of employees.
This morning I googled coronavirus and interest rates. Amazingly, I immediately found a few articles predicting that the Fed will most likely cut interest rates on or before their March 18th meeting to help calm the panic on Wall Street. This could allow potential home buyers the opportunity to access a home loan with even lower mortgage interest rates. Some would argue that a move by the Fed to cut interest rates will do nothing to repair the disrupted supply chain which is causing the markets to tank, but unfortunately, that has not stopped the Fed in the past and most likely won’t stop them now. President Trump has gone so far as to say that the Fed should cut rates to 0%, so who knows what might happen.
There are so many moving pieces in a real estate transaction, all of which require people, that you really could go down a bunny trail with “what ifs”. For example, what if an inspection company team gets ill? Or a title company office? These teams work in close proximity and could easily infect each other. But I digress.
I must admit, I am a total germaphobe. I wash my hands more often than a surgeon on any given day. Yet, when I look at what is factually accurate about this virus, it is less deadly than the SARS virus outbreak, the Ebola virus, or even the everyday flu. That being said, it is still quite likely that coronavirus will disrupt our everyday lives, if nothing else. I was told many years ago by my Houston’s Restaurant manager that “Proper Planning Prevents Poor Performance”, so being aware of the risks and planning accordingly is simply a good practice.
I wish you all a very healthy future! Think positively, right? And if you see a guy about 5’8″ with strong eyebrows, dry hands, and a respirator mask on, feel free to say, “Hi Chad!” :)