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Coronavirus, Wall Street, Oil, and Your Home

Now that’s a title you don’t read every day! Sounds like the proverbial Perfect storm, but let’s take a close look.

As of this writing, the major Stock Market Exchanges are down significantly, the Coronavirus is promoting temporary business, school, sports, and event closures, and Iran and Russia are over-producing oil on purpose. Bhat wat about our homes?

Some of us who remember 2008 might, at first blush, be worried over seeming parallels between then and now, but it’s important to look under the hood. There are fundamental differences between the underlying economy in 2008 compared to now, and the events triggering each crisis couldn’t be further apart. Today there is an enormous money supply and the banks are well-positioned to continue financing business and consumers. Add to that federal intervention, and we may pull through even better than some experts are guessing.

A few years after 9/11, new regulations, perhaps well-intentioned, incentivized banks to make bad loans to those who could not repay. So they invented the financing mechanisms that eventually inflated the bubble and crashed the system. In 2008, banks, speculation, and over-leveraged consumers were the problem. The institutions responsible collapsed or were merged or taken over or, in the end, bailed out. Today, the scene is virtually the opposite set of conditions, hence the historically low mortgage interest rates for an ocean of available money. No doubt we’ll face repercussions, but if we’ve ever been in a strong position to weather a storm, it’s right now.

Of course, Coronavirus is deadly serious, and may well warrant the aggressive actions we’re seeing. Still, most Americans realize that the vast majority of infected people will recover, and are focused on keeping their elderly or sick loved ones safe. And I truly believe most Americans know this will pass; that it is indeed temporary.

Stocks can fall rapidly (and rise just as quickly) when facing uncertainty, but real estate by its nature is slow to react. You can’t just call your broker and order them to sell your home. As of this writing, real estate prices are still fetching near record-high prices nationwide, and buyers are enticed by the lowest mortgage rates they’re ever likely to see again. The National Association of Realtors, based on a March 13 survey, is reporting an 11 percent drop in buyer activity (based on agents’ reports) and reporting that a full 78 percent of agents are seeing no change in business activity at all. NAR forecasts an overall 10 percent reduction in listings in the coming months compared to their original 2020 spring forecasts, meaning all the experts, at the height of uncertainty, fully anticipate 90 percent of sellers to hit the market with confidence.

The stock markets will come back based on inherent value, although theories abound as to when and by how much. Coronavirus should go virtually dormant with the warmth of the summer as it follows seasonal patterns, and as you read this a vaccine is undergoing human trials and anti-virals are being tested at record paces. Low oil prices are a win for everyone (except oil companies and oil investors, which could affect some of us more than others), until the countries facing off decide enough is enough. We’ll be facing the week-to-week consequences of these several major events, but there is no cause for serious worry, much less panic. Airlines will get back to capacity within months, not years. Restaurants, theaters, schools, sporting events all will return to normal one by one over a relatively short time period.

While I can’t predict what the future will hold, I can say that right now is still a terrific time to list. For a detailed review of your home’s value in today’s market, give me a call at 818.970.2946.

Article Source: Calabasas Hidden Hills Insider