The ongoing crisis has thrown everything and everyone for a loop. Social distancing means that schools and businesses are shut down and many people are out of work. A question for our industry is how is this affecting the broader real estate market — and how can investors who are still actively looking for opportunities possibly use the current market situation to their advantage?
If you have cash on hand and good credit, you have a leg up. In response to the economic uncertainty of the current crisis, large homebuying institutions are pausing or backing out of contracts, and banks on the coasts are tightening lending (although I have not seen that as much here in the Midwest yet). Banks will continue to lend, but since a number of borrowers will no longer be able to borrow due to credit restrictions that I anticipate slowly coming to all markets, if you have cash — in the form of a draw from a line of credit, loan from a universal life insurance policy, self-directed IRA, self-directed HSA or cash in the bank or other cash locations — now is a great time to take advantage of it.
One way is through flipping properties. Housing stock is currently extremely low here in St. Louis. According to our analysis of MARIS data, only 11,585 properties were on the market in February 2020 — the lowest number of available properties in the month of February since 2017. There are a number of reasons for that, with one being that housing starts are down and people in general are leery of listing their property during this crisis.
But, factor in that while people are quarantined in their homes, many are realizing that their current houses are inadequate. And then, couple that with the fact that a flip house is vacant and unlived in for showings. While conforming to safety guidelines, it is a good time to renovate and flip a house. Per our analysis of MARIS data, housing prices are continuing to go up, with an average cost of $162,500 in February 2020, almost a $20,000 increase since February 2017, presenting a great opportunity for investors who take action now.
Another possibility for real estate investors lies in rentals. Here in St. Louis, more tenants are deciding to renew their current leases than ever before. My property management company has the lowest amount of rental stock on the market than we have ever had — slightly lower than a normal winter rental stock. We are also still signing leases for vacant properties, but the normal seasonal churn that we see heating up in April has not happened.
Between the low stock and the decreased amount of churn, investing in rentals right now would be a smart idea, especially since the federal stimulus and unemployment packages should allow some people affected by the crisis to continue to pay rent. However, I don’t recommend investing in super high-end properties, because we can expect that wages will continue to be depressed while the public health crisis is ongoing.
Whether you decide to flip properties or rent them, between the depleted stock and the number of institutions exiting the market, the current unfortunate situation does present an opportunity for real estate investors. Although I anticipate a little bit of price churn as things normalize to the new reality, investors who want to use the overall market situation to their advantage have a prime opportunity to do so.
Toronto and Vancouver Real Estate Inventory May Get A Boost From AirBNB Slowdown – Better Dwelling
Canadian real estate markets may be getting another inventory headwind soon. National Bank of Canada (NBC) research estimates AirBNB hosts may contribute to oversupply later this year. As the slowdown impacts hosts, many may be incentivized to sell. By their estimates, just a quarter of hosts selling would cause inventory in cities like Toronto and Vancouver to swell.
AirBNB and Housing Inventory
AirBNB helps homeowners take existing housing stock and convert it to short-term rentals. Rather than staying in hotels, travelers can now stay in existing non-hotel stock. At first, it wasn’t a big issue when just a few people were doing it. As the platform expanded, people began buying additional housing just to operate short-term rentals. By repurposing housing that would otherwise be long-term units, cities now need additional housing. Basically, short-term rentals lead to an inventory squeeze, pushing rents and prices higher. Temporarily at least, for as long as the squeeze persists. That squeeze could end as quickly as travel did.
The Travel Industry Expects A Big Slowdown
The travel industry doesn’t expect travel to recover quickly from the pandemic. The US has approved some routes cutting plane traffic up to 90% until September. The IATA, the trade association for international airlines, also doesn’t see traffic returning to 2019 levels until at least 2023 – at the earliest. What does this mean? Fewer users of short-term rentals, and more competition from hotels for those travelers. All of this can have a big impact on real estate inventory, according to NBC numbers.
Canada’s Biggest Real Estate Markets May See Inventory Spike
If just a quarter of AirBNB inventory is sold off, NBC sees a lot more real estate listings on the market. In Vancouver, the bank estimates real estate listings would rise 12%. Montreal would see an increase of 27% in resale listings. Toronto is another story though, with inventory forecasted to rise a whopping 34%. That’s with just 25% of AirBNB exiting as hosts.
AirBNB Boost To Canadian Real Estate Inventory
The potential increase in real estate listings if 25% of AirBNB properties were listed for sale.
Source: National Bank of Canada, Better Dwelling.
The boost is another headwind for inventory rising later in the year. Inventory was already expected to rise in the coming few months. NBC economists believe this would be “exacerbating oversupply in the coming months.”
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How Is The Real Estate Market In Muskoka Post COVID19 – Hunters Bay Radio
In a brand new video podcast series, Gerry Lantaigne with Sutton Group – Muskoka Realty discuses the world of real estate in Muskoka during the Coronavirus pandemic.
Join Gerry every month as he updates you on The State of Real Estate
Watch the inaugural episode here:
May real estate sales in Powell River promising, says board president – My Powell River Now
Powell River’s real estate market is warming up.
Powell River/Sunshine Coast Real Estate Board president, Neil Frost, said May sales were “surprisingly good.”
“We were up significantly from April,” Frost said. “April was very poor, but of course that was obviously due to the pandemic and state of emergency declared in B.C.”
Frost said there were 23 residential sales plus two vacant land sales in the city last month, which is up from 11 total sales in April.
He added that those numbers are promising, especially in these uncertain times.
“March started out great and in the last half (of the month) really trailed off, and then April is where we’ve really felt the effects,” Frost said.
“May and June have already been very busy. Year-over-year, we’re looking at 41 sales for May 2019 and we had 23 for May 2020, and those are residential sales. Total sales for May 2020 was 25 total sales compared to 46 total sales for 2019.
While down from last year, Frost said 25 sales in a month is “pretty strong for our market.”
Affordability is helping to drive the market locally. Frost said the average home price is roughly $390,000.
“We’ve even seen some competing offers and property selling for over-list price,” Frost said.
The pandemic has changed the way realtors do their job, Frost said: “Worksafe BC has released a series of protocols and each office has also developed their protocols and basically, we’re trying to avoid in-person showings as much as possible.”
That said, serious buyers want to see a home in person before making the biggest purchase of their lives.
“We do take precautions, depending on the seller’s threshold,” Frost said. “Definitely sanitizing, and gloves, and facemasks if requested, (physical) distancing at all times, buyers are asked to keep their hands in their pockets and not touch anything in the homes, limit the number of people inside a home at a time. Really trying to restrict it to the serious buyers or the people that are going to be on title.”
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