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The United States real estate industry is clouded with uncertainty since several important factors create a mixed overall picture. On one hand, the COVID-19 pandemic had forced the country into lockdown, which led to businesses closing doors and laying off employees. The unemployment rate is 13.3% according to the latest release by the Bureau of Labor Statistics, above the 200 financial crisis peak, meaning fewer people will be able to buy a house in the near term.
On the other hand, the Federal Reserve stepped in by flooding the markets with liquidity, pushing interest rates lower, including mortgage rates. Recent mortgage activity suggests there’s growing demand, but will that be enough to spur a V-shaped economic recovery and further development for the real estate sector? What should an owner do to preserve his investments and at the same time, not miss the upside momentum, if it occurs?
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Rent, Don’t Sell
During an economic downturn, income at a national level drops, and as a result, spending decreases. The real estate sector is not excluded since individuals and businesses will be more conservative with the finances. Due to depressed economic conditions, wanting to sell property could turn out to be a difficult task. Owners will need to offer big discounts and enough reasons the value will keep going up in the next few years.
Same as during the past economic crisis, renting is one of the areas where the activity will spike, considering the uncertainty generated by the pandemic will continue to weigh on the overall sentiment. Consumer behavior had been impacted in a meaningful way, with confidence needing a longer time to build up once again.
Understand the New Definition of Luxury
Despite encouraging remarks by politicians, economists are not enthusiastic about the prospects for the economy in the near term. The June 9th Atalata Fed estimate for the Q2 GDP is at a staggering -48.5% and it will take several quarters of solid gains to even get back to the 2019 levels. Given such numbers are unprecedented, a reassessment of what luxury means is absolutely required. Consumer behavior had shifted and now saving money is a top priority.
Although the pandemic will be a solved problem at some point in time, the economic damage inflicted in the US will be felt for years to come and the debt necessary to put the country back on its track will have to be repaid. Currency devaluation alone can’t be a game-changer without other structural changes in government spending.
Get Advice from Experts
Due to the severity of the current economic downturn, owners should not be reluctant in asking for advice from other experts, which can be easily found online. One of them is Ofir Eyal Bar, which became a guru of real-estate investments, after years of following other investors. His entrepreneurial spirit together with his writing hobby made him from just an investor to an online guru that enjoys sharing his tips and strategies with the youngsters. Same like him, other investors are keen on talking about their expertise in the real estate sector. With assistance from a real estate investor, owners have a higher chance of making the best decisions.
Keep a long-term vision
Even though at some point the economic activity will bounce back, economists warn that a prolonged period of sluggish economic growth will follow in the next few years. As a result, returns in the real estate sector will be below average. Owners should keep a long-term vision in place, to reach higher compounded returns. Optimizing expenses and finding innovative ways to boost the value of a property will be required to remain competitive and provide real added value, as Ofir Bar suggests. In order to succeed one should manage to get past the short-term difficulties and expect the best from the future.
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Brought to you by Justin Weinger.
Feature Photo: Shutterstock