5 Ways Coronavirus has Changed the Real Estate Market for Investors
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5 Ways Coronavirus has Changed the Real Estate Market for Investors

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5 Ways Coronavirus has Changed the Real Estate Market for Investors

 

Coronavirus has reshaped the US economy in many ways. Real estate has been one of the industries most impacted by the pandemic and continues to go through changes that will likely transform the business for years to come. But for every door that closes, another opens. If you’re an investor, there are still plenty of opportunities out there if you know where to look. Here are five ways that coronavirus has transformed the real estate market and how you can use these changes to your advantage when planning an investment strategy.

 

Lower Interest Rates

 

The Federal Reserve slashed interest rates to zero back in March, where they will likely stay as the nation continues to deal with the pandemic. This means for the foreseeable future, loans will be cheaper than usual. Banks and other lending institutions may be more cautious with giving money to new investors until things settle down. But if you have an existing relationship with a lender, you will likely be able to get a cheap loan or restructure an existing mortgage to a lower rate.

 

Buyer’s Market 

 

Property values have decreased in many places - especially large cities - to accommodate for the fact that the economy is struggling. That means if you already own property, you should hold on until the market stabilizes, unless you absolutely have to sell. But, if you have some money put away or you’ve been preapproved for a loan, now may be a good time to purchase a new investment property. Depending on where you live, you may have trouble renting the property in the immediate future. But if you’re looking to do a flip or just buy a property to hold onto until the market changes, you may find a steal.

 

Increased Demand for Single Family Homes

 

With the quarantine still in effect and unlikely to lift dramatically anytime soon, many residents are making the shift from renting an apartment into buying a home if they can afford it. This means the demand for single-family homes has increased substantially over the past few months. Check out this graph published by the US Census Bureau and the Department of Housing and Urban Development on new residential sales in the US.


 

 

As you can see, there was a sharp decrease, then a sudden explosion in 2020. The drop off was caused by the lockdown. The sudden increase was caused by the stabilization of the pandemic in many places, coupled with the realization that this would be a prolonged battle. So, if you’re a developer, flipper or a wholesaler, now is a great time to invest in single-family homes.  

 

Mass Exodus from Cities

 

Residents are fleeing big cities like New York and Los Angeles to the comfort of the suburbs. Whether this trend is temporary or permanent is yet to be seen. But for the time being, suburban areas are hotter than urban. So, if you’re in the market to buy a new property, you’ll have better luck selling a home in Westchester or New Jersey than you will a condo in Chelsea. These cities will likely bounce back eventually. If you have some cash to spend, you may consider trying to snag an urban apartment at a reduced price. But if you’re looking to turn a profit in the near future, suburbs are the way to go.

 

Uncertainty in the Commercial Sector

 

Unless you’re a seasoned pro and you have access to an attractive deal, it’s wise to avoid the commercial sector for the time being. No one quite knows if or when this industry will bounce back and it will be hard to make any money unless you’re already an expert. People still need access to residential housing. But with Amazon and other online shopping options, commercial real estate is a riskier bet while the virus is still at large. It’s unlikely that commercial real estate will disappear entirely, but it will go through some growing pains in the next few years. This may present interesting opportunities for experienced developers and investors. But regular investors should stay away from the commercial market for now.

 


Comments

Travis Murphy
Travis Murphy

Great read! Interesting to hear others perspectives are on the market. Thanks for sharing!

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