The outbreak of the coronavirus and the spread of the disease to other parts of the world have caused rising fears of a global pandemic, with an immediate harmful impact on real estate markets. Moreover, vulnerability increased over the course of last year, making prospects for early 2020 all the more uncertain. The US, the world’s second-largest economy, appeared relatively resilient now, but 2.1% real GDP growth in the fourth quarter of 2019 hardly qualifies as blooming. The lack of Chinese demand is also likely to take a toll on the US economy, where China plays an important role as America’s third-largest and most rapidly growing export market. The sharp plunge in a preliminary tally of US purchasing managers’ sentiment for February hints at just such a possibility and underscores the time-honored adage that no country is an oasis in a uncertain global economy. The coronavirus is undoubtedly causing a significant disruption to economic activity in the US. The magnitude of US growth is highly uncertain, as it depends on the extent that it spreads, the length of contagion, the measures taken by the US to curtail the risk of infection and the timeframe until an appropriate vaccine has been developed. This uncertainty with respect to the ultimate impact on economic activity will keep a real estate market volatility higher. But as long as the outcome of the current situation is highly uncertain, you should continue to buy and sell in “pockets of opportunity” areas as reported in our companies’ quarterly newsletter Market Cycles. As historical evidence shows, the outbreaks of such diseases are temporary in nature. Remember, real estate allows you to control your risk because you can actively participate in the decision-making process. Passive investments such as stocks don’t give you this opportunity. Movements in real estate values are less erratic than in the stock market. Most people don’t understand the economic forces influencing the market. Since real estate is less volatile, it’s easier to control and to understand. Real estate is tangible. You can touch it, you’ve been exposed to it all your life, and you can identify with it. As a result of this familiarity, you are better able to understand it. In the end, epidemiologists will have the final say on the endgame for coronavirus and its economic impact. While that science is well beyond our expertise, we take the point that the current strain of coronavirus seems to be more contagious but less lethal than SARS was in early 2003.
This is a huge hit in the economy. Thank you for the information. Let’s be safe guys and prepare for what’s coming.
Thanks for sharing this information!
We are living in interesting times. Lots of traps and lots of opportunities to be found in the market.
What’s everyone’s thoughts on this? In my opinion I think it’s going to be somewhere between the best case and worst case scenarios: it will be bad, maybe lasting 2-3 months, then things will start to improve.
Great read and definitely something to think about.
Good Neighbor Home Buyers
I couldn’t agree with you more. The real unknown is how long this all will last and it’s impact on the economy. Hopefully the government steps in with stimulus to help folks that are losing their jobs.