Real estate

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stilljammi
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Real estate

Post by stilljammi »

I'm curious about buying real estate during coronavirus. Assuming one has the means to do so, what kind of discount would you expect? Does 20% off the asking price sound like a reasonable starting point? Or is the real estate market just frozen for the time being and supply/demand thaw out in the near future.

Neuronic
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Joined: Sat Dec 10, 2016 9:33 pm

Re: Real estate

Post by Neuronic »

Locally there has been low supply so prices have held/increased. Maybe in a tourist area you could expect discounts, but otherwise with things reopening I would not hold out for a dip. Also, mortgage rates are low, which usually goes with price increases. This is less of an economic issue and more a health issue. Now if things progress to a true recession/depression that is another issue.

bosco7
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Joined: Fri Oct 25, 2019 5:58 pm

Re: Real estate

Post by bosco7 »

I can't tell if you are serious or just baiting. In my area (DMV) inventory is super low and and bidding wars are occurring on low-mid level houses (sub 900k) and houses are moving fast (< week). Of course this is all location dependent. Maybe other areas with large AirBnB presence might see some contraction, but there is so much demand for houses that I doubt it'll be a long term trend. If you think you can secure a 20% discount then stability in that market may not be something that would return in the near future (5 years).

crondanet5
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Re: Real estate

Post by crondanet5 »

Wait. Many houses should face foreclosure soon and owners will glut the market. Look for two car garage, full basement, central air.

McWinning
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Joined: Tue Jun 04, 2019 5:55 pm

Re: Real estate

Post by McWinning »

I think there is a good chance of a significant decline. The first article below has some survey data showing significant financial strain that is eating into retirement savings in order to cover costs. Second article has numbers quantifying the start of a housing market slip. As savings run dry, some people may be forced to sell while the market is already low. If enough people are forced to sell, it could drive prices much lower as they compete for a sale during reduced buyer presence.

One thing that may prevent this though is government intervention forcing mortgage/rent forbearance. Hard to tell how this significant manipulation might affect a free market though. Instead of real estate crash, maybe it causes a financial crash as government transfers revenue loss to banks.

I don't think anyone could project exactly how deep a housing crash might go. Seems like a moving target as cascading effects will continue to unfold. Maybe set your own target of what an acceptable discount would be and then execute if it is reached. If it is ambitious enough, then you should recover potential losses within an acceptable time-frame. I would steer clear of investment properties though because of the potential forbearance issue I discussed.

https://www.studyfinds.org/survey-3-in- ... -lockdown/
https://www.ccn.com/us-housing-market-c ... fficially/

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mjedlin66
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Re: Real estate

Post by mjedlin66 »

Real estate inventory in my area has been declining every year since 2013. Meanwhile, our area is growing rapidly so demand keeps going up. And with central bank interest rates getting cheaper, people are willing to spend more.

My wife and I just looked at an old 1917 farm house on 1.5 acres that we love. We have been small-time real estate investors for 5 years now. We had to walk away from that house when my realtor told me it was going to be a bidding war well over the asking price.

I don't know if the market will decline. But it certainly isn't declining right now. It is possible we will see a wave of foreclosures around the end of 2020. I asked my mortgage broker and he told me that the foreclosure process takes about 6 months. So you would need to see widespread desperation, which we don't currently have because the CARE act is over-funding unemployment, followed by 6 months of a lousy job market. If that all happens, then yes, there will be a wave of foreclosures.

But, demand might still be high enough to buy those houses and keep prices up. Who knows.
Owner/creator of TSPcalc.com - "Know your numbers"

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bloobs
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Re: Real estate

Post by bloobs »

1. If you're referring to residential real estate then I would wait, until it actually has crashed. Setting an threshold of "20%" or similar is not a good idea. It all depends on what type of property it is, the condition of that property, where the property is, etc.

2. If you're referring to commercial real estate--don't even consider it. For several factors:
(a) Before 2020, there has been generally am increasing oversupply as developers have built up new units EVEN before actual demand warrants it.
(b) In the post-COVID age, even with the best possible economic outcome or recovery, a paradigm shift has occurred. Everyone now realizes how feasible full-time teleworking is. That will result in demand destruction for commercial real estate space leasing. Even government agencies are seeing it now. We are looking at occupancy rates so low entire business centers will look like ghost towns in post-apocalyptic movies.
Anger and intolerance are the enemies of correct understanding.
― Mahatma Gandhi

If it's a choice between a difficult truth and a simple lie, people will take the lie every time. Even if it kills them.
― Paul Murray

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mjedlin66
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Re: Real estate

Post by mjedlin66 »

bloobs wrote: (b) In the post-COVID age, even with the best possible economic outcome or recovery, a paradigm shift has occurred. Everyone now realizes how feasible full-time teleworking is. That will result in demand destruction for commercial real estate space leasing. Even government agencies are seeing it now. We are looking at occupancy rates so low entire business centers will look like ghost towns in post-apocalyptic movies.
I agree with you on this paradigm shift, and I think we're going to see de-urbanization of residences as a result.

Why live in a $1,000,000 home in the heart of Seattle when you telework? Even if you have to go to the office once a week, mass teleworking will encourage people to move 3 hours away.
Owner/creator of TSPcalc.com - "Know your numbers"

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stilljammi
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Re: Real estate

Post by stilljammi »

mjedlin66 wrote:
bloobs wrote: (b) In the post-COVID age, even with the best possible economic outcome or recovery, a paradigm shift has occurred. Everyone now realizes how feasible full-time teleworking is. That will result in demand destruction for commercial real estate space leasing. Even government agencies are seeing it now. We are looking at occupancy rates so low entire business centers will look like ghost towns in post-apocalyptic movies.
I agree with you on this paradigm shift, and I think we're going to see de-urbanization of residences as a result.

Why live in a $1,000,000 home in the heart of Seattle when you telework? Even if you have to go to the office once a week, mass teleworking will encourage people to move 3 hours away.
Good points all around. With telework, it's definitely changed my search, but I'm hoping some of those properties in the city will drop.

Thanks for the responses.

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