The novel coronavirus (COVID-19) is in everyone's mind right now for good reason. But how is it affecting real estate, and what should you do to remain productive in 2020?
By now, unless you live under a rock (which personally makes me slightly jealous) it’s pretty much a fact that you’ve heard of the coronavirus.
From newscasts, podcasts, and lunchroom conversations, it feels as if except for the coronavirus, every topic of conversation has suddenly disappeared.
And to be fair, there’s a good reason why. The coronavirus, officially called COVID-19, spreads very easily. It can cause acute respiratory illnesses, has a high complication rate and has a high mortality rate among older folks and those with compromised immune systems.
Government and media response has varied significantly too.
Depending on where you get your news, you either need to start building a bunker and stockpile supplies, masks, liquidate your stock portfolio and put it all in gold ASAP, or make fun of people for overreacting to this “slightly stronger seasonal flu.”
While we do have our own personal opinion about how worried we should be, it would be irresponsible to give medical advice on the matter, since we’re marketers, not health care professionals.
However, we ARE qualified to talk about how the virus has already affected real estate, what it COULD mean for home buyers and sellers in 2020, and what you can do to remain a productive real estate agent even in the thick of it.
How Has The Coronavirus Affected Real Estate
Because of the particularly virulent nature of the COVID-19, more and more countries have canceled flights, posted restrictions on public meetings, and have quarantined large numbers of people.
As of March 10, 2020, Italy is in lock-down, and it seems like more countries are going to follow suit. China, the epicenter of this disease, has already suffered a huge economic disruption. Millions of people are still quarantined, unable to go to work or schools, causing worldwide supply chain disruption.
This international fear of the coronavirus, coupled with a financial market that hasn’t seen a correction since 2008 (and still reeling from the effects of the Chinese-American trade war) has prompted many nations’ central banks to lower their interest rates to stimulate their economies.
The stock market, rather predictably, has been fluctuating wildly. And whenever this happens, the media hypes it to no end, causing home buyers and sellers to take a wait and see approach, and hold on to their money.
Current homeowners are also less likely to spend money on renovations and upgrades.
But all that doom and gloom is only half of the story. Just like any financial disruption, including the 2008 recession, there are winners and losers. The coronavirus scare may bring on opportunities for investors to with the capital to scoop up properties
Coronavirus’ Effect On Foreign Buyers
China is the largest foreign buyer of real estate in the USA, according to The National Association of Realtors (NAR).
Chinese buyers accounted for $13.4 billion of $77.9 billion, or 17.2% of the foreign market share.
Because of the coronavirus’s significant impact in China and the recent bans implemented by the U.S. government, Chinese buyers will have a harder time purchasing properties in the U.S.
This comes on top of 2019’s decrease in Chinese investment in American real estate. Many economists attributed that downward trend to a decreasing U.S. housing inventory, the U.S. China trade war, and the strengthening of the dollar.
If the coronavirus happens to trigger the next recession, we can expect that foreign investors’ confidence in their own real estate markets will diminish, and they’ll have a greater interest in investing in countries with a strong, resilient economy, such as the U.S.
Effects On Commercial Real Estate
While the coronavirus has only affected relatively few individuals in the U.S., there’s always the potential it could become a full-blown outbreak. If that were to happen, commercial real estate would be heavily impacted.
That’s because the government would be forced to quarantine more and more people, ban public events, and encourage people to stay at home as long as possible.
This would cause an immediate drop in commercial and industrial activity, which would inevitably cause people to shop less, with more and more businesses defaulting on their commercial real estate loans.
At this moment, companies such as Amazon, Google, and Apple are asking employees to telecommute, and it’s likely other companies will follow suit.
The Federal Reserve’s Latest Interest Rate Drop
In order to offset some of the economic damage caused by the coronavirus, the Federal Reserve dropped its benchmark interest rates by half a percent on Tuesday, March 3, 2020. This was the first, unscheduled emergency rate cut since 2008. The benchmark interest rate is now between 1-1.25%
Regarding the reason behind this drop, Fed Chairman Jerome Powell said: “we saw the risk [the coronavirus poses] to the outlook to the economy and chose to act.”
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And while the Fed did not mention it will lower its rates any further in the near future, it’s almost a certainty that it will do so. Not just as a response to the coronavirus, but also in order to stimulate the economy after the stock market crash and a potential recession.
While any drop in interest rates by the Fed makes it easier for new home buyers to buy a new home, the timing of this drop does come at a point where there are fears of an economic recession that could cost people their jobs. Not mention at a time where people are encouraged to practice social distancing and avoid public places.
It’s hard to know for certain to what extent home sales will be affected by this drop. While this and future drops will cause some economic stimulus, the rate is already near zero. There’s only so much economic stimulus that can be made by dropping interest rates any further.
However, this also opens up opportunities for investors with enough capital to scoop up more properties.
What it could mean for you as a real estate agent
As a real estate agent, you will have to continue your job representing the best interests of your clients, even in the middle of the coronavirus scare. Even if your city hasn’t been affected yet, it’s a good idea to comply with recommendations from the Center of Disease Control and Prevention (CDC), as well as common sense.
If your home seller decides to hold an open house, you could offer mini bottles of hand sanitizer, wipe down surfaces such as doorknobs or cabinets with disinfectant wipes.
If you were considering improving your digital marketing strategy or implementing new technology to your marketing strategy, this could be the time to do so.
This slowdown in market activity gives you the perfect opportunity to finally implement that content marketing strategy you’ve been putting off.
While everyone is panicking, why not reassure your clients of your real estate expertise, write about how you can help protect their interests even in a coronavirus-induced recession, and why real estate continues to be the safest investment vehicle out there?
Don’t know what to write about, or how to get started with your content marketing strategy? We got you covered here. Here are 72 blog ideas, a primer on hyperlocal marketing, and an introduction to content marketing.
And as we mentioned in previous articles, there are tons of tools you can use to improve your productivity and the reach of your marketing efforts.
Thanks to technologies such as VR, 3d videos, and e-signatures, it’s no longer absolutely essential to have a client in person in order to show them a property or to close a deal.
Communication tools such as Skype, Facetime and Google Meet let you talk to and interact with buyers and sellers for free.
Technology is definitely your friend here!
With the epidemic growing day by day and more cases being discovered in the United States, the best thing most real estate agents can do is buckle down, use technology in order to remain productive, and weather the storm.
This doesn’t mean that people won’t be interested in purchasing homes. It does mean however that you will need to be adaptable, and not rely exclusively on in-person meetings to conduct business.
Hopefully, this article has given you a decent insight into the current affects the coronavirus is having on the market, and how to deal with it as a real estate agent.
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