Coronavirus & Bay Area Real Estate

The Coronavirus is hitting peak levels of fear. Employees are being told to work from home and countless events have been canceled in an attempt to reduce the spread of the disease. We’ve already seen the stock market tank in reaction to the slowdown in productivity.

The question for us is… how will it affect the real estate market?

The Bay Area Market Was HOT🔥!

Over the past few weeks, the 30 year fixed mortgage rates have been at all-time lows. With a 3% interest rate, buyers are now able to afford more and were willing to compete with dozens of other homebuyers for each property.

In early 2020, the Bay Area real estate market was extremely hot. As of last week, the Coronavirus hasn’t really stopped the buying frenzy. Dozens of groups were still going to open houses (wearing masks and gloves for protection) and still putting in offers above listing for the properties. Appraisers are having a hard time justifying the purchase price (which could mean that buyers need to make up the difference out of pocket).

Declining Stock Prices Affects Down Payment

But now that the stock market has taken such a huge price drop, buyers may decide to sit on the sidelines again and see how the housing market gets affected. Some buyers rely on selling their stocks to fund the down payment and closing costs of the property. Selling at a loss never feels good, so they’d prefer to wait for the market to recover.

Private Money Lenders Are Becoming More Conservative

We’ve even seen hard money and private money lenders change their criteria on the projects that they will finance. When a market is unstable, lenders prefer to become more conservative and will increase the rate for their loans as well as require the borrower to put up more money for the down payment to protect their downside.

Strategies For An Incoming Recession…

A lot of people are talking about black swans and how this could be the trigger for the recession. In this turbulent time, it’s probably not a great idea to take big risks and start a new development project, but instead, purchase something that can help your cash flow during the storm.

Rental properties are a great asset to acquire because it’ll provide great cash flow for you while you hold it and you won’t have to worry about the value of the home until you decide to sell it. People are always going to need a place to live, and rents may actually increase during a recession.

Final Thoughts

Overall, I would stay away from riskier projects during this time and focus on developing your strategy to take advantage of the dip. Listen to podcasts and read blogs to learn different strategies from experts.

Don’t panic from the news of the virus.

The fed has recently decreased interest rates by 50 basis points and oil is extremely cheap. This will create a stimulus in our economy. We might not see it now, but we’ll see the effects in a few months. Factories in China are up and running again and we’ll have toilet paper restocked on the shelves soon 😊.

Stay calm, and everything will work itself out.

By the way, if you need a hard money loan for your next real estate investment project, contact me to get $1000 off of your processing fee.