Resilient Realty
Coronavirus cases are spiking in many parts of the country, the additional $600 in unemployment benefits is expiring this week and several large companies are announcing tens of thousands of job cuts. Will real estate weather the storm? Most experts expect the market will remain strong — at least in the short term. The combination of record-low interest rates and hordes of still-employed buyers descending on limited listings has kept prices high. Any fallout is most likely to occur in the late fall or early winter, when the real estate market tends to cool off anyway.1
Property Prices
Determining the worth of various types of real estate has become more difficult due to limited transactions in the time of Coronavirus. Thankfully, REITs (Real Estate Investment Trusts) trade publicly daily, providing some insight into values. Year-to-date through 6/30/2020, data centers are up 19%, infrastructure is up 17% and industrials are up 2%. On the flip side, hotels are down 49%, retail is down 37%, residential is down 18% and both healthcare and office are down 25%.2
Dangerous Deliquincies
Freddie Mac reported that the single-family delinquency rate in June was 2.48%, up from 0.81% in May 2020 and up from 0.63% in June 2019. This is the highest serious delinquency rate since October 2013. The data includes mortgage loans that are three or more monthly payments past due or in foreclosure. Mortgages in forbearance are being counted as delinquent in the monthly report but will not be reported to credit bureaus.3
Role Reversal
In past economic downturns, it’s been manufacturing that drove the economy into recession. Americans stopped buying cars, homes and appliances — while activities such as eating out and going to the movies helped bolster the service economy. In this recession, the situation is reversed. Service activity has collapsed, while manufacturing is quickly recovering due to stepped-up household purchases of cars, furniture, sports equipment and home renovation materials.4
Putting In Place
Golf lovers are taking advantage of being locked down at home to lower their handicap. In the early days of the Coronavirus outbreak, Richmond, Virginia company Tour Greens Mid-Atlantic got upwards of 15 inquiries a day for their home practice greens — up from eight or nine per week. A typical practice green averages about $30,000. So, does this feature make economic sense when it comes to selling a home? U.S. home listings from June 2019 – May 2020 that included the key words “putting green” were 5% more expensive per square foot.5