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5 Ways COVID-19 Changes Real Estate Investing

Hey! What’s up? Kris Krohn here. And today
i’m going to share with you the top 5 ways that Covid-19 is affecting the real
estate market for investors and consumers. I can’t even begin to tell you
how many people are hitting me up and they’re wondering. “Kris, are you going out
of business? What’s happening to the thousands of homes that you’re buying?
What’s going on for you, man?” Right now, we are literally in the fog of
war. People are having a hard time seeing what’s real, what’s fake, what’s true. And
the reality is we have never faced a pandemic like this before. Today, I’m
going to dive in. I’m going to share with you the facts, the data, the best information
out there. And I’m also going to share with you my opinion on what’s going to happen in
the next 6 months. Understand that coronavirus is creating crazy
uncertainty in the market. Everyone’s freaking out because we saw the stock
market tanked and they’re assuming that the same thing will happen to real
estate. Now, first off, you realize that this
isn’t any normal, typical recession, depression.
This is government mandated. This is people’s rights all over the world being
stepped on right now. And as we talked about a government-mandated recession, it
means that right now we have businesses shutting down because of the government.
We have our economy being stepped on because of the government. And as a
result this is not like other recessions we’ve seen in the past. This data is
going to surprise you as I go over the top 5 things that are happening in the
world today that are impacting the real estate market because of the coronavirus.
And at the end, I’m also going to share with you some super exciting pivots. Things
that I think are mind-blowing and cutting edge in the world that we live
in for real estate today. So, point number one on how real estate is being affected
by Covid-19 for consumers and investors. Number 1, corona virus is creating
uncertainty in the market. But you need to understand that that uncertainty is
very different when it comes to the stock market as well as real estate. For
example, the stock market functions on certainty. When certainty is low, the
market tanks. When certainty is low in real estate,
the real estate market can’t tank. Why? Because it’s illiquid. It’s not like, “Oh, I
don’t like the news I see today. Everyone, hurry and sell your homes.”
Remember the stock market is an idea. Real estate is a hard tangible asset
based on human beings, supply and demand saying, “Excuse me. I need a roof
over my head. And even if we have a recession, I still need to live somewhere.”
Ultimately you need to understand that real estate isn’t purely an investment.
It’s actually motivated by people simply wanting a place to hang their hats. So,
let’s dive in and understand this: We definitely are in economic winter. We’re
experiencing a stock market recession. Does that mean that the real estate
market will go down? Everyone’s freaking out because we saw the stock market
tanked and they’re assuming that the same thing will happen to real estate
because that’s what correlated in 2008. Adam data solutions however recently
came out an article in this graphic evaluating the last 4 drops in stock
market real estate. And check this out. Backing all the way up to 1980 when we had GDP dropped by 2.2%, guess what happened to home
prices? They were up 4.5%. They actually didn’t
correlate. Similarly just the very next year, 18 months later, GDP – was
down 2.7 percent. Home prices were still up 1.9%.
But look at what actually happened in 1990 to 1991. We do see a correlation. GDP
dropped 1.4%. And the home pricing market went down 0.9%. They
correlated. So, the time before in the 80’s, they didn’t in the 90’s, they did. Now go
with me to March 2001. During this year, home prices were up 4.8% when GDP was
down 0.3% after the dot-com bubble burst. Bottom line, they didn’t
correlate. Home prices were up even though GDP was actually down. But check
this out: Right now, 2008, this is what’s on everyone’s mind because 12 years ago,
everyone remembers that the home prices actually dropped 13.9%. One of the biggest drops we have seen since the Great Depression because
we had this huge subprime bubble. Something we definitely don’t have today.
And GDP also dropped a whopping 5.1%. So, this is what we actually
referred to as the Great Recession. The question right now with this government-forced recession is this a natural recession? And doesn’t mean that real
estate has to correlate? Well, we know from looking at this right now that the
only correlate 3 out of 5 times. The question right now is do they
correlate now? For you to understand that answer, we’re going to move on to point
number 2 of how corona virus is affecting the real estate market. Which
is that the corona virus, Covid-19 actually doesn’t change our shortage in
real estate right now. Freddie Mac came out and said that we are short 3.3
million homes. In other words, we have a caught up from the shortage of
the subprime crisis of 2008. After all of these years of building, guess what? We
don’t have a ball yet. The stock market might function on confidence. But real
estate functions on basic supply and demand of baby making. Right? I’m talking
about population, immigration. Look at this for the United States. This is
showing from 1950 and projected by the United Nations out to the year 2102.
Look at this relation growth curve. Do you know what
this means? This means that real estate prices have to keep going up. And when
there’s a shortage, we have to build more. So, while we have this government
mandated recession, you need to understand that real estate might be on
pause in some areas. Real estate could even slow in some areas. But ultimately,
what happens once we get in control of the corona virus? Before corona virus hit,
Fannie Mae it came out and said in 2020, we have an a significant increase in
forecast. How much? After increasing just over 1% annually this year, growth in
same family housing starts with accelerates up to 10% during 2020. Going
from 1 to 10 percent… I mean, this is astronomical huge growth. And the reason
why they’re predicting this is because they know that we’re missing 3.3 million
homes in America. You can’t have a bubble burst if there’s no bubble. In fact, it’s
the opposite. We actually need to build more. By the way, if you’re really liking
the information that you’re getting right now, do yourself a favor and
actually subscribe to this channel. Every day, I come out with brand new videos
designed to help awaken your financial genius and make the best financial moves
for your financial future. Point number 3, pandemics pause real
estate. But does it snap right back? The reality is we got to look back at
history and see what we can learn. Recently, Zillow came out with an article
and they looked at what happened to Hong Kong in 2003 when SARS hit it really
really bad. Essentially, what they’re showing here is the correlation between
what happened with SARS and the volume of real estate transactions versus the
pricing of real estate. And you know what they found, they found that immediately,
the yellow line right here in the middle once it hit, volume transaction dropped
initially. Why? Because people were doing their version of social distancing back
then. However, after a short period of time, look what happens. Real Estate’s
snapped right back. Volume kicked right back up and people
were back to real estate investing. At the same time,
if you look at the blue line, you can actually see that real estate in Hong
Kong was already trending down. And it stayed true to that. Does that actually
correlate? No. Actually the volume bounced right back up and prices did what they
were doing in Hong Kong anyway. This is what we call the V trend versus the U
trend. In a U trend, the market drops and then it drops for a while and then
eventually swings back up. But a V trend says actually there was an incident
where everything dropped. Let’s call it a government-forced recession and then the
moment we got on top of the virus, guess what happened? Boom! Everything snapped
right back up. Last week Forbes came out with an article. And what they did is
they interviewed the top 5 producing real estate agents. And here’s what they
had to say about real estate and the pandemic. Few economists believe that
we’re in for the brutal elongated U that American experienced through the Great
Recession. Most predict a more rapid Corona V especially for manufacturing
and retail pointing to the speed with which business and factories have
reopened in China and in South Korea already. Many of you know that when the
Great Recession hit, all of my real estate competition, investors, everyone
went out of business because foreclosures were through the roof. For
me, that actually represented one of the very best times to be investing in real
estate because with so much product back to the bank, it’s not the government’s
job to clean it up. That’s what investors do. So, I went into the hardest-hit
markets like Phoenix and Vegas and we literally bought thousands of homes.
Homes that were brand-new and had been selling for a quarter-million, $300,000. I
was buying him up for 80 thousand, 90 thousand, 199 hundred thousand, 120 thousand dollars. And when we talk about that U, it took about 5 or 6 years
for the market to catch up. We built up a huge supply and demand problem. And then
guess what? The price has shot back up. And inside those first 5 years, my
investors made over 100 million dollars. So, what happens when the
government actually lifts its restrictions? I think we’re going to
experience a snapback. Is it on pause right now? 100%.
Am I still buying real estate during the pause? I’m going to share that at the end
of this video. By the way, my boys love to create stores even though they really
don’t have customers. And here with corona virus, this
is their most recent store taking toilet paper that they did not buy. I’m not sure
with the prices. But they’re selling it. If you want to know how to manipulate
the real estate market either as an investor or is it consumer and make the very
best choices for the next 6 months, you need to understand point number 4. Is
corona virus producing foreclosures? Currently, it’s not. -In the current
mortgage crisis in my opinion is going to be rather short term. -I like Ram. I
think he’s got a good head on his shoulders. He goes on to actually say “In
his opinion”, that the government will likely continue bailing us out until we
actually get through this pandemic. At this point realistically, the Fed just
seems like they’re on track to bail out anyone who potentially even needs it. By
the way, please beware of a lot of the media that is out there trying to
instruct you on how to do forbearances. The government is not allowing
foreclosures to actually take place. But a lot of people don’t know that they’re
destroying their credit by calling up their banks and saving a few bucks by
saying, “Hey, please do a forbearance.” If you have to do it please be aware that
in 2008 when forbearance has occurred, after the crisis, banks and people viewed
your credit as bankrupt. And many times it took up to 7 years before your
credit was fully usable again. So, please beware of that by the way, banks have
been playing super nice with people who have been really negatively affected by
corona virus. But please, beware we even have YouTubers like Meet Kevin.
They’re out there actually instructing people how to get forbearances. He’s
super young and hasn’t lived through the cycle to actually know what will happen
when a forbearance is actually viewed on your credit like a bankruptcy. Now, by the
way, whether foreclosures stay on pause or not really has to do with how long
the corona virus is going to last and government’s position on it, I think
personally that the government believes that since they’re mandating what we can
and can’t do and who can work and who can leave their house, that right now
they’re doing everything they can to avoid what will become otherwise mega
class-action lawsuits after this is all passed. People going back to the
government saying, “Your choices personally financially hurt me and you
need to rectify that.” So, I think that we’re going to see that. There might be some
sectors like vacation homes or Airbnb where homes might get foreclosed on or
go back because guess what? People are staying in their homes,
they’re not necessarily going out and vacationing. Just like people are
pivoting their everyday lives to adapt to what the corona virus is doing,
businesses are doing the same and that goes for real estate as well. Number 5,
brokers, realtors and lenders are pivoting the way that they do real
estate. Social distancing means that real estates on pause, right? Not necessarily.
New technology like matter port cameras are being used to create virtual
walkthroughs. Literally you can go through this house right here. Zoom in
anywhere you want to go and literally check out this entire house, site and seeing
without actually going in and checking out the house. This kind of innovation, it
lights me up because with our technology today, we’re always going to find a way.
This is great news. Governor Cuomo of New York actually issued an executive order
allowing for virtual notarization. And look at how it’s being used. “Crisis
teaches us to be resilient…”, says Forbes. “…creative and gritty. Where there is a
will, there is a way to get any deal done. Closings are still happening. Banks have
learned to support and accept desktop appraisals. Co-op boards are facilitating
interviews through zoom and Skype. And we had one deal closed recently…” Check this
out: “…where there were 4 cars in the POC
parking lot representing the bank’s attorney, the sellers attorney, the buyers
attorney and the title companies masked and gloved running back and forth
getting signatures. That brings me hope that we can get through this.”
While, most economists believe that we’re going to see a V and a major snapback.
The reality is this type of thinking and then technology produces change where
things will never be the same again. Real estate only becomes more virtual
and it also only becomes easier. So, am i out there buying real estate the way I
was before corona virus? Yes. I’m actually getting my hands on as much
real estate as I possibly can. Not only did we crush it during 2008. But I know
that when crisis is at a peak, so is opportunity. In fact, I’m still finding
deals that have 25 to 30 percent ROI. However I want to be really clear that
we have been pivoting hard the last 5- 6 weeks. We’ve been adding more value for
our clients. We’ve been getting more value away. We’ve been
helping more people in their experience of building wealth. We’ve been releasing
business products so that people that lost their jobs can make money. And we’ve
been out there in the real estate game doing as much as we can.
Many members of my team, dude, we know what it’s like to put in 8-hour days, 10-
hour days, 12-hour days. Some of us 17- hour days to keep on top. Now fortunately,
we’re actually in growth mode and we’re hiring. I know that’s not true of a lot
of companies out there. But that is because we’re doing everything we can to
pivot. And this economy right now with this government forced recession is
mandating that if you don’t pivot, you might die or your business,
metaphorically. What’s going to happen with real estate in the next 6 months? I’m
going to tell you that I’m going to keep buying as much real estate as I can. If
this pause lasts too long, you will likely see a lowering of price
in a million dollar home. Maybe even a 5 thousand-dollar home. But if
you actually stick to homes price under the median, that’s where you’re going tO
have your greatest safety. I recently looked at the last 4,000 homes that I’ve
done. Not a billion dollars worth of real estate. And we didn’t aggregate look back
on all of our real estate. And one of the ways that we’ve been protected
especially in recessions is that we’re buying so far below the median that
we’re still serving the major single-family housing market that is on
the rise right now where we don’t have enough assets. And by the way, if you’ve
ever wanted to get in the game as a real estate investor, there are certain
markets you absolutely want to be in right now. And if you want to know if
those are, you should click the link below where you can connect directly
with me. For the first time ever, I’m actually giving myself one out. So, if you
actually want to connect with me personally, ask other questions about
real estate, disagree with me or connect in any manner, go ahead and click the
link below. You’re going to get all the details of getting my phone number. Text
me and let’s make sure that you’re as informed as you possibly can be on how
to crush it in real estate during this environment. Because make no mistake
during economic winter, when people are thriving, they are the leaders for
spring/summer and coming fall. By the way, I’m sitting a whole bunch of books that
are going out the door. All of these books are free. They’re based on my first
book that I wrote, The Straight Path To Real Estate Wealth. People also request
this publication for free. In this economy, you need to become more
knowledgable. Knowledge is power especially if
you act on it. So, if you want to get any of my books for free, when you click the
link below, we start texting just let me know and I’m going to get one pushed out
to you right away, Hey, thank you so much for watching today’s video. If you liked
it, do me a favor. Smash that like button. It certainly tells YouTube that this is
information worth sharing with others. Kris Krohn here leaving you with the
most important information to make sure you can control, command your own
financial future, take it back and live the most amazing life that you can.

Reader Comments

  1. I am curious how the housing shortage estimates are made. Do they factor in when people lose their jobs they might move back in with their parents and lowering the housing demand? Anyone can share some insights?

  2. Awesome video Kris, thanks for posting! We are launching a channel and are releasing a series of videos with tips for managing rental properties remotely. Hope you take a look! Thanks

  3. I see a crash in housing prices and forclosures when forbearence period ends, i expect high inflation as well. The governement screwed realestate investors

  4. Materports are dead. Zillow has a 3D home tour app and it’s free. No reason to pay $40 per

  5. Hey Kris what do you think about building spec houses? Is that smart to do now while Interest rates are also way down or wait until there is more certainty?

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