We get this question all the time. And to be frank with you… NO ONE REALLY KNOWS!!!

As savvy and successful as investors can be, they also rely on the opinion of other sources such as new articles/agents. It’s not to say that these investors do not have the resources to fulfill their due diligence, it is just that agents and publications have their finger on the pulse of the market and can provide timely feedback that will allow investors to make a better, sound decision.

The State of the Real Estate Market

Currently, the 10-Year Treasury is at one of the lowest percentages we have seen in the history of America (0.694%). Since the 10-Year is as low as it is, banks have lowered their interest rates on lending as well. This means that money is currently cheap to borrow.

One would imagine that because rates are so low, investors are gobbling up real estate at every opportunity. However, because the eviction moratorium is in place and many companies have let go or furloughed their employees, some tenants are unable to pay their rent. As a result of these Covid-19 consequences, investors are siding on the err of caution and for the most part, staying on the sideline.

Current Market Example – Multifamily

Let’s use multifamily as an example – {how does an investor underwrite a deal on an apartment building but will not know whether tenants will be able to pay rent once he or she acquires the building?} Let’s say you put 40% down and a bank offers 60% loan-to-value, but there is an uncertainty as to whether tenants will pay their rent. How does a bank pencil out their vacancy factor? With tenants staying at-home for a longer period, what underwriting guidelines does a bank use to assume the increase in utility consumption?

What we have learned over time is that regardless of the market, investors will always sell & buy in a good and/or bad market. Nevertheless, it is imperative that you/we stay up to date with feedback from other agents and publications that indicate the sentiment of the market.