Real Estate Update – March 2020

Hey guys, here’s my update for the San Diego Real Estate Market for March. I know that a lot of people have been globally affected by COVID-19 and I wish them all a speedy recovery and safe times ahead.

We Are Entering a Recession

Our market has fallen by astronomical numbers and we will soon start to see layoffs and employment rates drop massively. Most of us assume that a recession precedes a housing crisis. This is simply not the case as over the last 5 recessions that we’ve seen, only one of those actually resulted in a housing crisis; namely the foreclosure crisis of 2008. Out of the remaining 4, only once did housing market values go down and that too, by a mere 1.2%

This is Likely to Affect Investors the Most

This outbreak will affect many people across the world and from a housing point of view, it’s going to affect investors the most. When people can’t pay their rent due to job losses and layoffs, those investors can’t pay their mortgages. I see banks stepping in to help the homeowners pay their mortgages; something that they most definitely owe us after the foreclosure crisis. Bank of America has already announced that they’re going to forego next month’s mortgage payment. However, I don’t see the same level extended to investors, so the multi-family ones are going to have a hard time right now. Vacations rentals will get hit the hardest.

Foreign Investment will Increase

Foreign Investors will want to get into our market right now because it’s relatively safer than the other viable options out there. I don’t see the the demand dropping so low so as to affect values. Also, low inventory levels will offset this resulting in stable prices.

Message to Homeowners

I don’t think homeowners need to worry too much right now. I see the government definitely stepping in to extend the deadline of mortgage payments. We don’t have too many subprime loans floating around nowadays either (they lead to the foreclosure crisis of 2007-8). Right now they’re less than 5% of all mortgages. This means that most responsible homeowners will be able to work it out  with their banks and hence, it’s unlikely that a huge trend of fire sales will come into the market.

Opportunities on the Horizon

Potential buyers out there are likely  to find great deals right now. Interest rates are at an all time low and one could negotiate good terms. If you have a recession-proof job, you should start getting active and maybe 60-90 days from now, you will see good deals emerging. Investors could also acquire good assets from other multi-family investors who perhaps over-leveraged and need to sell.

The last thing I’d like to point out is that there will be a rubberband effect from this, and the market will bounce right back so be prepared.

If you guys have any further questions regarding the way it’s going to further impact San Diego real estate or anything along those lines, feel free to reach out to me using the information below.

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