COVID 19 vs Real Estate 20 The tangible vs the invisible

Its been a challenging time for a lot of people out there due to COVID 19, and amongst other industries, real estate has also been affected. It has left buyers, sellers, realtors, and people connected with the industry wondering about the full impact and the subsequent fall out on the housing market due to the drop in showings and open houses during SIP and the perception of buyers and seller alike.

Speculation is rife, especially in the bay area, which is considered the epicenter of the real estate bubble and how much COVID 19 will affect housing prices. It’s not all bad news even though COVID has crippled various service-related industries with the stock market going down and unemployment seeing higher than ever numbers. However, I do keep getting asked the same questions by buyers and sellers alike that I would like to address and share in this article:

1) What is going to happen to the real estate market and how does it compare to the last downturn?

No one can predict what will happen to real estate prices, nor is it advisable to try to time the market by any means. From articles that I have read and looked at statistical data (some of which I have shared in earlier posts), prices don’t seem to be going anywhere south. In fact, in some of the better neighborhoods, prices have gone up with some areas still commanding multiple offers. The demand may have gone down but it is small compared to the listing demand of people wanting to avoid selling their home during the pandemic. This has resulted in less inventory than anticipated during the spring buying season, and due to the lack of supply vs the demand for housing, the price of real estate has not gone down. The one good thing for buyers is that they don’t have to compete for as much nor do they have to pay 150k-200k over the asking price as had become the norm. You can see the chart above only for Santa Clara county that had 1003 homes for sale a few weeks ago vs 4459 homes for sale 10 years ago. We are over 75% off from that time frame. Here are a couple of articles worth reading:

https://www.keepingcurrentmatters.com/article/how-will-the-next-recession-affect-the-housing-market/

https://www.keepingcurrentmatters.com/article/what-you-need-to-know-about-inventory-shortage/

2)Will the high unemployment result in a spike of foreclosures?

There are millions of unemployed in the US with California having one of the highest unemployment rates. Most that have lost their jobs are in the service sector and companies that are banking on those sectors. Several are in the low-income bracket. However, for the bay area, most people that are buying homes are earning 150K-300k mainly in the technology industry. As long as their employment is intact and transferable, there does not seem to be any pressure on their housing payments. However, the contract workers employed by these giants could face some degree of layoffs.

https://www.yahoo.com/finance/news/fed-officials-warn-of-long-road-ahead-for-us-economic-recovery-200113101.html

3)What will happen to the rental market?

Rents are expected to come down; more so for the commercial real estate market compared to residential. This is purely based on the new norm of working from home and companies requiring lesser leasing space along with the aspect of respecting social distancing. Also, executives working in major cities like San Francisco where the rents are very high, there will be a flight of tenants moving to bigger open spaces to avoid density. Demand for leasing office space will drop as a result of which landlords will be forced to reduce rents and provide better terms to lure companies. Based on location, one can expect to see a reduction in residential rents.

https://sanjosespotlight.com/bay-area-rental-market-rates-expected-to-drop-due-to-covid-19/

4)How will the trade war with China combined with COVID 19 affect the supply chain/pricing for new building and construction projects?

This can be challenging depending upon the outcome of the trade war and the impact of COVID on supply chains globally. We will need to find other sources of manufacturing and supply chain to rely on, including domestic manufacturing. No doubt, we will not be able to meet labor rates as those of China but the government must be able to offer alternatives like tax breaks, etc to manufacturing companies locally to offset some of those costs. With the supply chain disrupted, and procure to source products from other countries being more expensive, the result could see an increase in prices for new construction projects.

5)Will the decline in the stock market affect housing prices in the bay area?

It will not. Real estate is localized and all about the location to the proximity of jobs. The technology sector is still going strong. The bigger companies are more open to employees working from home. The demand has come down but is still outstripping supply not affecting prices. The stock market on the other hand is rife with speculators and can go down further. Every investment is a risk and nothing can be guaranteed, but when the stock market went from 29,000 points to 18,000 points (a 40 % drop) in a few weeks, the real estate market stood still and watched itself stabilizing. Real estate will not drop nor increase by 40% in a few weeks.

In the short term, housing is winning, and in the long term, historically, housing has always won. Economic projections may be dire, but this time housing just might be the catalyst to get us out of this as it contributes approximately 18% to the GDP. Stay safe.

https://www.nahb.org/News-and-Economics/Housing-Economics/Housings-Economic-Impact/Housings-Contribution-to-Gross-Domestic-Product

Nikhil Dhawan

408 478 5396

ndhawan@intero.com


Posted on June 8, 2020 at 5:35 pm
Nikhil Dhawan | Posted in Uncategorized |

Lead Generation Strategies: Try and fail, but don’t fail to try.

Lead Gen has always fascinated me since the beginning of my career that spanned from Event Management to SaaS to starting my own business and selling real estate. Though the journey has been very different, and difficult at times, it is a sought-after subject with many Pundits and stakeholders discussing which strategies work best and which do not, so here are my 2 cents on it-

There are multiple ways of generating leads from the age-old cold calling strategy to email marketing, Events, Social Selling, Webinars and Account-Based Marketing to name a few. I have tried and tested several of these and must admit that every lead generation effort is unique in its own way and works differently with different people that have different skill sets, but these executives also need to try other strategies and explore beyond the scope of what they have been able to deliver thus far. Just because one does not like cold calling, does not mean it doesn’t work. The same thing can be said about Social selling. Just because one does not like to tweet or publish on Linkedin does not mean it doesn’t work. The goal is the same-Get the attention of the stakeholder or multitude of stakeholders in order to get them into a quality sales pipeline. More importantly, sales and marketing need to work together to generate the best results (easier said than done).

Over the past decade, the landscape has undergone a major shift. The introduction of multiple new digital touchpoints in the customer journey has created a far more complex sales cycle and brought a massive influx of data into the enterprise that needs to be utilized effectively. Also, follow up is key and you will need any number of these strategies to get prospects back to the table. One fails when they do not have an effective follow-up strategy and give up when the prospect goes dark, but this is where utilizing the various methods of lead generation comes back into play.

Overall, strategies need to be deployed in order to get the best results from a multitude of resources. I have been guilty of sticking to only one or two methods in the distant past and had to change my mindset to improve and explore new opportunities with better results. Try and fail, but don’t fail to try-Stay hungry my friends!


Posted on October 16, 2019 at 6:28 pm
Nikhil Dhawan | Posted in Uncategorized |

The most expensive part of the home buying process-PROCRASTINATION. When is the best time to buy real estate? #Bay Area#home buying#Rent vs buy.

We have all been there and asked the same question to ourselves and to our friends, peers, and family about the timing to buy real estate. The answer is relatively simple. The best time to buy real estate is when you can. There are different groups of people ranging from the first time home buyer to the family upgrading to a second home to the avid investor. One of the goals of all these groups is largely the same and that is to build equity over time in order to get more financially independent. This article will focus on the first time home buyer, though some instances will apply to all concerned.

Take the first time home buyer who is currently renting. Living in the Bay Area, if you are single or have a small family where rents are skyrocketing, and no doubt will keep rising, waiting for the right time to buy or for the market to change could turn out to be the most expensive part of the buying process. These are the open closing costs that are never-ending and hidden in plain sight called Procrastination. If one is on the fence and paying rent, all that money is going towards someone else’s equity, not theirs. Once they have the 10-20% available for the downpayment, they should seek to find the right property and start building equity for themselves.

Most do not understand that given today’s mortgage rates, buying is cheaper than renting. If you have been paying $4000 for a home in the bay area, it amounts to about $252,000 over 5 years OR $ 531,000 over 10 years ( I am assuming a 2% return on the investment of periodic contributions over the time period and it is to portray opportunity lost toward the contribution of equity in real estate that is owned). Besides paying rent, most do not understand the amount that they are going to be able to save on their income taxes with the mortgage rate interest and other deductions if they buy (Call your CPA or tax professional). Instead, if one chooses to buy a home worth $900,000 with a 20% downpayment, the monthly mortgage with today’s interest rates is approximately $3500 and the pride of homeownership comes along with it. Of course, there will be other conditions one needs to comply with.

Let’s do a what if analysis-what if one or both spouses are laid off? Will they have to stop paying rent? No. At that stage, will they qualify for the loan they are seeking? No. Can they move into their own home and build equity over time? No. Will they be able to continue renting and own nothing? YES. Also, there are plenty of buyers sitting on stock options where they have enough to cover the downpayment, but timing the market has its own set of issues. I still come across first time and second-time home buyers at my open houses and networking events that rue the missed opportunities of 2009/10 for buying their first home or a second investment property, and everyone wishes they had invested then. However, people have taken time to recover and while some did get into the market, several still remain in the renting mode.

Please feel free to call /message me anytime to help you with your real estate goals.

Nikhil Dhawan

408 478 5396

www.nikhilodhawan.com

BRE#O2O51137


Posted on October 16, 2019 at 5:51 pm
Nikhil Dhawan | Posted in Uncategorized |

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