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Investing in real estate has long been considered to be a safe bet during an economic recession.
However, the coronavirus crisis is unprecedented.
Therefore, before making any decisions, you need to do the same thing you do when taking the first steps into stock investing.
Namely, you need to research the market trends and forecasts to see if they are promising. Moreover, today you also need to check the flow of foreign investments into the US market.
As global money transfers are becoming more easily accessible, overseas investors become a major factor in real estate.
Impact of the COVID-19 Crisis on the Real Estate Market
In any economic crisis, the real estate market is contracting.
It’s just the way things are, and the COVID-19 crisis is no exception. However, the current state of the marker shows some significant deviations from how it should behave in a standard recession.
On one hand, in May alone, missed mortgage payments in the US amounted to $4.3 million. The number of sales has also dropped in March when the crisis truly started. Predictions for a 40% loss of office leasing and a reduction in commercial property rent have landlords in a panic.
Should they come true, the impact on the economy will be tremendous. The main reason is that the commercial real estate industry in the US is worth about $17 trillion. It also affects a multitude of economic contributions from construction companies, landscaping, property management and maintenance, etc.
From this perspective, the real estate situation isn’t looking all that good. Also, the expected drop in sales did happen. And the market has yet to recover even to last year’s numbers, let alone improve.
However, improve it does. Despite the US economy heading for a recession compared to the Great Depression, home sales are rising.
Moreover, real estate prices on the housing market show none of the expected drop. They keep growing, albeit at a smaller pace. And while sales are not exactly high, they are also increasing consistently.
Therefore, it has become clear that the COVID-19 crisis is affecting commercial and residential real estate very differently. This is where the best opportunities for investors lie.
How Does International Real Estate Investment Affect the US Market?
To fully understand the exact state and possible progress of the US real estate market today, one must consider the foreign investment as well. In 2019 property sales to foreign buyers amounted to $77.9 billion. That number is already at $74 billion in 2020, and there’s yet almost half a year left to go.
The creation of cheap international money transfers that go through FX companies has changed global real estate investment.
Suddenly, this type of investment became available to small independent investors, as opposed to only big corporations of before. Now, there are still only a few money transfer companies operating in USA. They are mostly the biggest and oldest in the industry as only those can afford to work under the US restrictions. The country has many limitations for forex brokers and these companies are mostly classed as such.
Therefore, now top providers of cheap global money transfers operating in the US are Currencies Direct, OFX, and TransferWise.
But even those are enough to have billions of dollars coming to the US from foreign real estate investors. The main interest is from China and Canada, and it’s definitely not waning in the wake of the coronavirus crisis.
It’s also an important fact to note that this type of investment is focused on residential housing. This is definitely one of the main reasons why it remains reasonably stable while the commercial and hospitality real estate markets are going deep into crisis.
Best Investment Opportunities in the US Real Estate Market Right Now
Residential housing looks like the most promising sector for real estate investors today. Residential housing in the suburbs, in particular, is a good idea. And even as the market is contracted a bit still, this situation won’t last. However, prices aren’t sure to drop anytime soon.
The COVID-19 pandemic has completely changed the way we work. Remote work was a luxury and mostly part of the gig economy prior to it. However, now everyone who can work remotely does so. And they will continue with this trend and might stick to it completely.
People are also highly interested in moving out of heavily-urbanized areas. Therefore, residential housing in the country and suburbs is on the rise.
Finally, you should consider the impact that the pandemic had on construction. The level of demand for housing has always exceeded the level of construction. But with the lockdowns, thousands of developments are delayed if not terminated completely.
All things considered, there are factors that indicate an imminent and big increase in demand for housing. However, as there is no development to meet that big surge in demand, the prices should soar. It’s a stellar opportunity for an investor, especially as prices are still somewhat stable now. They aren’t falling as they usually do during a recession. But this might not happen at all.
Remember that the coronavirus crisis is unique. Therefore, you can’t base your investment strategy on past trends. Instead, you should focus on the changes happening in the world today and build your forecasts based on them.
Bottom Line: Is It a Good Idea Invest in US Real Estate Now?
When you are starting with stock investments, it’s important to not overcomplicate things. It’s the same for real estate investing. It’s true that the world is in turmoil at the moment. And the uncertainty will persist for a while.
In fact, the coronavirus crisis is changing the world and the real estate market irrevocably. However, one thing remains a true constant, humans still need housing. Therefore, the real estate market will remain a reasonable source of income for investors for a while.
Note that due to the mass lockdowns the way people work is changing. Already there is no avoiding a permanent shift in the commercial real estate sector. It’s uncertain whether office space will be in high demand ever again. But residential housing does remain a safe bet. Therefore, if you want to diversify your portfolio to reduce your own risks, houses in the US suburbs seem like a good investment.