Real estate stocks tanked Monday, as the stock market’s 11-year bull run teetered on the brink of collapse amid coronavirus fears.
The New York Stock Exchange halted temporarily when the S&P 500 dropped by 7 percent early in the day. But once trading resumed, prices did not pick up and the indices neared bear-market territory: the S&P closed 7.6 percent lower. The Dow Jones Industrial Average ended the day down 7.8 percent, a drop of more than 2,000 points and the worst day of trading since 2008.
The toll the virus has taken on financial markets — as investors fear the illness will trigger a global slowdown — has been mirrored among public real estate investment trusts, stocks that typically were viewed as defensive investments.
The FTSE Nareit All REITs index, which tracks all REITs listed on the NYSE, the American Stock Exchange or the NASDAQ National Market List, declined about 7.7 percent Monday.
Companies more resistant to the virus, like storage and data center firms, are doing better than others that are more susceptible to see their bottom lines hit hard by the illness, like the hotel and retail sectors, said Omotayo Okusanya, a REIT analyst at Mizuho Securities USA.
If the virus ends up having a longer-term impact than originally thought, Okusanya said he would expect to see investors turn more to real estate firms that have longer-term leases, like health care or triple-net properties. Industrial REITs, which have recently seen valuations climb and are susceptible to hits to the global supply chain, may take a hit, he added.
Hotels have been particularly at risk from business loss because of people cancelling bookings and events. Pebblebrook Hotel Trust, whose stock plummeted almost 15.7 percent, withdrew its full-year and first-quarter guidance on Monday because of uncertainty stemming from the coronavirus. Hyatt Hotels Corporation withdrew its 2020 outlook last week.
“The hotels, you’ve kind of seen [the impact] in real time how their earnings outlooks are changing because they’re most exposed,” Okusanya said.
The mass selloff, as investors pull out of the stock market and CDs, could lead investors to turn more to private real estate, said Khashy Eyn, CEO of boutique brokerage Platinum Properties.
“The fact that interest rates are coming down to an all-time low…I think you’re going to see more money flowing into income-producing assets,” he said.
Cases of the novel coronavirus grew to over 110,000 globally. The respiratory illness, which originated in China in December, has so far killed more than 3,800 around the world and roiled financial markets. In the United States, the number of new cases grew to 213.
Many businesses have halted non-essential travel and supply chains have also been hit hard.
Northern Italy quarantined 16 million people, and the country’s prime minister Monday evening extended the lockdown to the entire country. Israel on Monday also instituted quarantines on new arrivals to the country. In the real estate world, residential brokerage Triplemint said it asked one of its brokers not to see clients, after the agent came into contact with someone who later tested positive for COVID-19.
Meanwhile, there have been complaints that testing for the virus has not been as extensive as it should be, which has triggered concerns about the long-term impact of the virus on the financial world.
“It makes us somewhat worried things will probably get worse before they get better,” Okusanya said. “And I guess against that backdrop you really start worrying about damage to the U.S. economy.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
