Corona virus, or more accurately, CoVid-19, is very much in the news. The market seems to be panicking. SXSW seems to be in question. Will the possibility of pandemic have an impact on the real estate market?
First, let’s say that with the low death rate, the not more than moderate contagion rate, and the medical prowess in the United States, there is certainly no reason to expect an apocalyptic scenario. Of course we should use prudence; no one wants to get sick. Of course, we feel for those who have lost loved ones and we wish for no more loss. However, for the real estate market here, we should have little to fear.
The supply chain gaps in hi tech manufacturing were caused by China’s need to contain the outbreak at the outset and what some might argue as an overdependence upon Chinese manufacturing. No one mentioned “just in time manufacturing” to which we are now accustomed. (If you are unfamiliar with the term, the opposite is “have some on hand” otherwise known in the old days as “inventory.”)
The equities market is reacting to the supply chain stutters because 1) the FANGs are the out-sized portion of the American market and 2) the market may be over-hot and topped out and 3) we have no idea how much froth has been caused by quantitative easing. By contrast, real estate is … well, real. While, sure, price is influenced by market trends and money supply; still, land will never go out of style, or a value of zero, or have more created – at least in the foreseeable future.
How could the virus impact the real estate market? People might possibly delay their purchases a bit. That, however, is not the real question. How might the market swings in equity influence those in real estate? The transfer of money would increase sales and possibly prices. Then, indirectly and possibly more importantly, since the market induced the Fed to lower rates, lower interest rates may increase real estate sales.
Here are what the experts are saying.