40: Real Estate During a Crisis
If 2008 was like a tornado coming through a town, this is probably a lot more like a giant snowstorm moving into town.
About This Episode
Real estate is a malleable industry, and one that persevered through Spanish Flu and both World Wars. While coronavirus upends our normal lives and threatens businesses the world over, this episode takes a historical look at the crisis and how markets will look when we come out the other side.
For more great information from Keeping Current Matters, visit: https://www.mykcm.com/coronavirus/
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JON: Even in the best of times, working in real estate can be challenging. There are so many elements that go into running a successful business, and having that perfect recipe is a rare and lucrative thing.
JON: Right now, across our country and across the entire world, people are avoiding one another, staying in their homes for unprecedented amounts of time, and practicing a new term that we’ve all heard a couple hundred times a day over the last few weeks: social distancing.
JON: Hello and welcome to Shop Talk: The Real Estate Show. I’m Jon Forisha, quarantined in my home office, and on this episode we look at what life is like as a real estate agent during times of crisis.
JON: The National Association of REALTORS® was formed in 1908, and since then there have been plenty of crises. In fact, you don’t have to go very far back in time to point to other examples of catastrophe upending the real estate markets. Many of my previous guests, and maybe even you, were working in real estate during 9/11 and the 2008 Great Recession. Those events were similar in the way they disrupted the entire world economy, but a virus is a unique event.
JON: You may have heard people comparing coronavirus to the Spanish Flu of 1918. There are a lot of parallels, especially since both are caused by H1N1 just like the swine flu of 2009, but there are also plenty of differences. 1918 was over 100 years ago, after all, and the world economy was not quite as globally linked as it is today. 1918 also happened to be the very end of World War I, which means it’s nearly impossible to tell what effects the Spanish Flu had on the stock market, since it was already ravaged by four years of global war.
JON: The Spanish Flu showed up and vanished just as quickly, and in the end it killed between 30 and 50 million people, or roughly 1.7% of the world’s population at the time. Those are huge numbers, and in terms of today’s population that would equate to about 100 million deaths. That’s an enormous number that we hopefully come nowhere near, but even with the Spanish Flu things rebounded fairly fast. That virus ended around the same time as World War I and markets quickly increased by 50% in just a few months.
JON: Though World War II thankfully didn’t coincide with a global virus, it had its own unique challenges. In 1940, following the Great Depression, American homeownership hit a century low of 43.6%. Two years later, non war-related construction was halted across the nation, which only exacerbated the situation. Once World War II ended, President FDR signed the GI Bill of Rights into law, which almost single handedly created the middle class as we know it. It addressed unemployment, education, healthcare, and government-backed low-interest mortgages, which meant even the poorest veterans could come within striking distance of homeownership upon returning home.
JON: By 1950, suburban growth was 10 times that of urban cities, and 55% of all Americans owned their own home - the highest percentage ever and an 11.4% growth over the low of only a decade before. By 1952, 2.4 million veterans had received loans, and the modern-day American Dream, of owning a house with a white picket fence in the suburbs, was created. Real estate was booming business.
JON: All of this is to say that coronavirus is not a world war, and though you might be going stir crazy in your house, this too shall pass.
JON: After the break, we talk with David Childers about what to expect in the coming months.
JON: Are you stuck at home avoiding the news while trying to stay productive? Learn online with The CE Shop, and knock out your CE requirements from the comfort and safety of your home. Use promo code SHOPTALK for 25% off the best real estate courses, available where ever and whenever you are.
JON: Keeping Current Matters is a great resource for the latest real estate news, and they’ve been busy the last few weeks putting out all kinds of useful content related to our current situation. We have a link to their latest coronavirus resources in the show notes, and recently they shared some data showing home price changes during the last five recessions. Contrary to popular belief, home prices actually increased in three of those five recessions, by as much as 6.6% in 2001. In 1991, prices dipped by 1.9% and, obviously, in 2008 they took a huge dive, down 19.7% overall.
JON: But whereas the Great Recession was caused by lax lending standards and originated in the housing market, a global pandemic is a different beast entirely. We were in the midst of the longest economic expansion in America’s history when the virus finally hit our shores, and though the markets look bleak now, it’s probable that once the quarantines lift, everyone will be eager to get back to business as usual.
JON: Just as the thought of a night out at your favorite restaurant sounds incredible right about now, many people are living their every waking moment within the confines of their house, becoming acutely aware of its every flaw and imperfection. When we’re free to again venture out into the world and shake each other’s hands, the market that should have been booming throughout the spring will be ready to explode. Though there have been countless disruptions - school schedules, the Olympics, and your favorite sport’s usual programming amongst many others - the recovery afterwards will hopefully be a swift one.
JON: David Childers is the Vice President of Content and Marketing at Keeping Current Matters, and he’s spent over 20 years helping real estate professionals become trusted advisors through education. Here’s David to talk about current events:
JON: So David, how is this crisis unique?
DAVID: So, you know, this crisis is unique in the sense that it causes, let me back up and say it causes a lot of us to think about 2008 and the housing crash. And so while that crisis was caused by housing and our financial system, this is caused by an external threat, which is a health threat, you know, in, in the, uh, corn of ours. Uh, so it's, it's a threat that's not systemic into the financial system. So different in those ways. And probably much more alike, 9/11 as an event versus systemic issues that we saw in 2008.
JON: What do you expect markets to look like once the quarantine is lifted?
DAVID: Well, that's a great question. I think the reality of people needing advice to buy and sell homes is not going away. People are, are going to need to do that. And, and right now the market has been put on pause. So if you can imagine the pause button being pressed, um, but we have a lot of information, uh, that, that, you know, when that day comes, when people can, you know, come out of their homes, not socially distance, you know, be back, um, that we believe things will be, uh, uh, very much, you know, rapidly accelerating at that point. Matter of fact, I saw a price water house Coopers study, uh, over the weekend that said 66% of business owners said they believed their business would return to normal within one month. Um, an additional 24%. So 80% of those business owners said between one and three months. So, so you're seeing things like once we get out of this, uh, business owners going, my business would come back.
DAVID: You know, if, if there were consumers out there, I think the other comparison I would draw between the past and now is if 2008 was like a tornado coming through a town, uh, and ripped everything up and destroyed homes and power lines and things like that, that had to be rebuilt. This is probably a lot more like a, um, uh, a giant snow storm moving into town where everything's shutting down. Uh, and once the snow lets up and we're able to all go back outside and the streets are plowed and we can get to the courthouse and we can get to a restaurant, um, we will do that. Uh, and I think all of us are ready to do that even a week or two in to this. Um, and I think the biggest problem you're going to have at that point is being able to give a ticket to a game that's being played to a restaurant to go have dinner because everybody's gonna want to go out there. And so I think you're going to see a lot more of that.
JON: Yeah, definitely. So what do you think the recovery will be like? There are so many people out of work, from being quarantined or from, you know, their bar or restaurant having to close. How will recovery look?
DAVID: Yeah, so I mean, let's talk about that. Let's talk about the people that are being dramatically affected that, that literally can't work from home, that can't do their, you know, their, their job in a, in a time like this. Um, I think you're seeing right now and you're going to continue to see more of it. Um, the federal government stepping in and industries stepping in to say, how do we help these people? So we're talking about housing here out last week we saw a FHA, Fannie, Freddie, say, Hey, we're going to for at least 60 days, uh, put on pause, the start of new foreclosures, huge. When you're starting to see banks say you can put on pause your mortgage payment. Um, that really comes out of some of the lessons that were learned in 2008 and not wanting to, uh, to, you know, live those again.
DAVID: And so what you start to, when you start to look at that, I mentioned that the price Waterhouse Coopers study. In 2008, we saw a recovery that was much more like aU shaped. We went down and then we kind of, we had some issues, so recovery was slow. I wouldn't look for this one to be much more of a V-shape we've seen in the last few weeks, uh, the U S economy going from a very strong position to two dramatic layoffs and a lot of people being affected like you mentioned. And then we have this pause kind of point and then we believe once that we're able to get back out, get back to work, get back in, uh, in the things that we will see that more than V-shaped recovery versus a U.
JON: So what should real estate agents focus on right now while they're quarantined stuck in their homes?
DAVID: That's a, that's a great question and I appreciate you inviting me on just to talk about this. I think there, there are three things every agent has to do. Let's, let's, let's not talking about quarantine for just a second. So three things every agent has to do. You have to generate leads, you have to nurture those leads and you have to close those leads. Those are the three things that fundamentally drive our business forward. And it looks like the third, um, a lot of people it's been taken off the table for and, and I think a lot more will be taken off the table for. So we've got a challenge with closing leads right now. What we can do is we can work on nurturing those leads. And I would argue there is never been a better time to position yourself as the expert and do what you've said you are right now to deliver that message to your business.
And certainly there are things that people can do right now that we can help customers do to be in a position to, um, buy or sell a home. Once we come out of this, you can still get prequalified for a mortgage and find out how much can you afford. You can still talk about, um, what's important to you in a home that you want to buy. You can look at homes online and virtually, uh, and a lot of places. So the most important thing that somebody can do right now is not take a situation from the fire into the frying pan. Not, not make things worse, but focus on what you can do and that's generating nurture leads right now and be the expert in your market and deliver great information to people. Okay.
JON: So keep doing what you should be doing already.
DAVID: Absolutely. Yeah. Okay. And bringing them, this is what this means. You know, this is what, when we see headlines and headlines are going to drive a lot right now. There's a lot of information coming out and there's a lot of fear that people have, but helping people make sense out of that is our job right now.
JON: Yeah, absolutely.
DAVID: You know, I read a quote and I'll read it to you, um, that I found, uh, I think it was yesterday and it kinda hit me in, in everything that's out there right now. And it's by a guy named Andy Stanley who is, um, the leadership author and has a church in Atlanta. Uh, and he said it's on the screen. It said when the story of COVID-19 is just a story we tell, let's make sure our stories are stories worth telling. And I think that to me, you know, means, Hey, what am I doing right now as agents, the most important thing we can do is care about more about the people we serve than we do ourselves right now. How do I get out in the market? How do I serve? And I think you're, we're seeing it across this country, the best of humanity coming out and people, how do I help? How do I serve? How do I get great information for our industry, uh, out into the market? We're going to let doctors and nurses and all those heroes take care of everybody who, who's sick. But how do we help people make sense of what's happening and really step up right now to do that.
JON: Though it may feel like you’re wasting time sitting around with nothing but Netflix to keep you company, remember that even the combined efforts of the Spanish Flu and World War I couldn’t keep the real estate industry down for long. The important thing now is to nurture your clients, organize your books, and prepare for that lovely day when quarantine is lifted and we can all get back to business as usual.
JON: That’s it for this episode of Shop Talk, thanks for listening! If you enjoyed the talk, you can subscribe to us on your favorite podcast player of choice. Shop Talk is a production of The CE Shop.