We are entering an unprecedented time period, perhaps comparable to the Great Depression. While it may or may not be as long lived (1929 through 1933), all indicators show that a deep recession is imminent and will be difficult to recover from. U.S. gas consumption is at its lowest ever; light vehicle sales are at their lowest level since the 1970s; and the way people are operating their businesses has drastically changed as many will continue working from home. 

In just two-and-a-half months, California’s unemployment rates rose to nearly 25%. Mortgage deferments, along with the eviction moratoriums will eventually catch up and add to the increasing debt so many homeowners and landlords face. Investors who were banking on the real estate market as a large part of their portfolio are now liquidating their assets and holdings.

For example, owning two pieces of real estate that are investment properties with prime location (location, location) and having maxed out potential, homeowners and investors may not see much appreciation in the next five to ten years so they must either be prepared to hold and wait for a sustained period, or sell now.

Conversely, many investors are realizing that a dollar in your hand now could be worth $2 to $3 dollars in the next year or two and they plan to invest heavily as values decrease and foreclosures and sales rise. The wise investor needs to be willing to take a discount now and sell to take advantage of what could be the best decade in home sales in our history. Future appreciation will take years and if they sell now, they likely will be selling high.

The "New Normal" Could End Up Being Better Than "Business as Usual"

According to one recent study, if you have something worth a dollar and let it go for 80 cents or even 70 cents today, you would be wise to hold on to your money. Projections say that a year from now that 70 cents will be worth up to $2.8.  

Conversely, if you are a first-time home-buyer and can afford to take advantage of the lower interest rates rather than paying high rents, you may find that your mortgage payment along with the tax advantages and deductions will end up saving you big money in the long run. If you can afford to hold onto your real estate for 10-15 years (or more) the prices may rebound by then and you will build equity, whereas renting will never help you realize a profit or nest egg.

Interest rates in 1979 were 18%; today interest rates are below 4%.  There is hesitancy in many buyers today who may not realize that during the financial crisis of 2007-2008, cash investors won. I had 30 offers on a short sale and 29 of them were cash. If you are expecting to take advantage of an incredible deal on the market, expect high numbers of investors and cash buyers competing against you.  

If you are moving up and purchasing a larger home, you will be buying into a market that has dropped by the same amount as what you sell for, in other words, a lateral move. You may be able to take advantage of the higher-end market if you are painstaking and patient. Just realize that you are not taking a discount on the sale of your home if you buy and sell in the same market.

When you buy, you likely can expect a discount so why not also sell with a discount?  Remember this calculation is not limited to just real estate, it could involve your business or the stock market investments in your portfolio.

Experts are saying there have been five big shifts in the market and this will be the worst we have seen in our time. Don’t let that scare you! The “New Norm� could end up being better than “Business as Usual.� Reality is that life goes up and down; we all know someone who has been affected during these times. This is a crisis. Sellers who are being proactive will benefit from their foresight.

My next article will discuss “Best Strategies for Mortgage Forebearance and Deferments� to help homeowners navigate through this and avoid foreclosure.