How Covid-19 Is Affecting Real Estate and Property Management
With the Covid-19 pandemic altering the way businesses operate, residential and commercial real estate and property management experts anticipate major changes ahead. As more and more property owners are hiring real estate professionals and property managers to deal with the impacts of this crisis, franchisors must begin offering more support and adapt their business models to appeal to the new normal.
Residential
The residential real estate market going into Covid-19 was tight, with supply at near-record lows nationwide and demand near an all-time high. As the pandemic began to play out, supply decreased even more as sellers pulled homes off the market or hesitated to put them on. With millions losing their jobs, many states allowed mortgage payments to be suspended, and lenders made it harder to get loans. By mid-April, the number of homes under contract fell 43% nationally, according to a report from real estate company Redfin.
Now supply and demand have begun inching back up slowly across the country, and experts are predicting a “market pause” as the pandemic ebbs. The pre-coronavirus housing market conditions are still present and will continue after the crisis ends. Demand and supply appear to be moving together, making this situation different than the Great Recession, when there was an abundance of supply.
In terms of the future of real estate after Covid-19, Property Management Inc. (PMI) and market statistics from the National Association of Residential Property Managers are showing that the impact hasn’t been as major as expected, especially considering the jobless claims. About 10% of tenants reached out about rent deferment in April, and PMI predicts that number may jump to 15% in May and could extend into June. A landlord may be able to operate for a month or two without payments, but any longer and there will certainly be an economic impact. The government seems poised and determined to prevent another major fallout through more stimulus funding, including possible direct rent relief, and many banks and states are providing relief and assistance through forbearance programs.
Commercial
It is important to show to the public that property managers and landlords can get in front of the fallout and proactively reach out to tenants to work together during this crisis to create solutions. By the same token, struggling brick-and-mortar franchisees should reach out to landlords to discuss possible strategies for success. Many commercial real estate owners may be waiving leases and payments to get in front of rent deferment requests.
There is also a significant chance that real estate prices will drop and more commercial spaces will become available. For incoming franchisees or emerging franchisors, right now could be a great time to negotiate with cash-strapped landlords.
Whatever the government does to support residential real estate will make its way to commercial. No business owners want to use SBA loans to pay rent, just like most Americans aren’t looking to give their $1,200 stimulus checks to landlords. The government will have to keep this in mind when creating policies. It’s important to watch what the federal government does to drive down interest rates to stimulate home buying.
In terms of residential real estate, the CARES Act put an eviction moratorium on mortgages and suspended the ability to charge late fees. When it comes to renters, several states are implementing similar protections. For example, Utah issued an order to make sure that no one affected by coronavirus paid rent until May 15. In California, renters who have lost income because of the coronavirus shutdown are protected from eviction for 90 days after the health emergency is over, giving tenants permission to defer paying rent for three months.
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