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The Incredible Resiliency of the Real Estate Industry

Mar 17, 2020 1:53:21 PM

We've been through it before, and, although this potential downturn won't be as deep or as wide, there are things you can do to minimize the impact. REAL Trends President Steve Murray offers his advice for overcoming the current Coronavirus crisis.

Steve Murray:

This is Steve Murray, President of Real Trends. This is a special podcast. In light of all that's happened in the last few weeks, particularly the last week, I thought I would reach out and share some thoughts with our listeners and our friends.

First, we pray that all of you, all of your families, all of your friends, all of your teammates at your companies, whether they're staff or agents, will stay safe and be well and pay attention to what we're being asked to do by the various state, local, and federal government authorities to avoid crowds and avoid gathering in large groups of people.

Evidence indicates around the world that that is among the most effective ways to slow the spread of this Coronavirus. A few things to share. Number one, we will come through this and we will come out of this. You have both the shock of the healthcare scare brought on by the Coronavirus and this economic sharp reversal.

Steve Murray:

People understand that there are millions of Americans who are going to lose their work either on a short term or even a longer term basis because of these effects. It's not going to be over in weeks or just a few months. The shock to the economic system of the country will take time to heal, but heal it will. It always has.

I refer to these few things as just observations from an old timer having been in the industry for 43 years and been through recessions, deep ones, in the 80s and again in the early 90s and again in the 2000s. This will not be that kind of a housing turn down, but we will have one.

Housing sales are going to slide regardless of hyper low interest rates. People when they lose their jobs, lose their means of income, and lose $6 trillion estimate of stock market losses are not going to react or act the same in terms of their view towards their homes, whether they be first homes, second homes, or vacation homes. People will change their view and attitude.

Steve Murray:

A couple observations about that. We fully expect that the strongest part of the market will remain the entry level and move up market because of these extremely low interest rates and because of the rising unemployment there will be great opportunities that didn't exist even a month ago for people who do retain their jobs and do have the means to acquire homes and can take advantage of these record low mortgage rates.

On the other hand, all of our experience from previous downturns, particularly when there were stock market reversals in the '80 to '82 period and again in the '99 to 2000 period, and then 9/11. And then in the '06 to '09 market turn down, the high end tended to recede in terms of unit sales deeper than other segments of the market and tended to take longer to come back.

Steve Murray:

So if your business tends to be concentrated in the high end, you may want to start working to diversify your client customer base away from the high end. It's just a matter of historical record that the high end in the severe downturns go deeper in terms of unit sales and take longer to return to normalicy.

Lastly, some of the changes going on by the, if you will, hunkering down and people working from homes, distributed employment, and the surge in online buying and the surge in take out and drive through dining, it's my belief that many of the things we're being asked to do to change the way we work and live, in fact, we won't go back totally to old ways.

As Dr. Phil Evans said in his book over 20 years ago, Blown to Bits, the internet changes everything. It changes the relationship between producers of products and services and consumers, but it also changes the way government and education systems work.

Steve Murray:

One could imagine one of the biggest changes may be when we find out truly that we can educate young people at the collegiate level without having to pay the cost of sending them to expensive campus experiences, and that more and more people may choose to get their education that way and from really superb university systems. There will be numerous changes due to the Coronavirus that will not see us go back to the way things used to be.

Last, we will come out of this. We always have because the resilience of the people and the economic system of this country, it's going to take some time, but we will come out of it. And the dream of American home ownership will persist and will prevail. This has been Steve Murray with a special podcast.

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