June 3, 2020
Most realtors are confident that everything is fine and that there is nothing to worry about. They could be right, no doubt. But I see it differently as I have lived through multiple corrections and do not believe that the numbers are irrelevant and can be ignored.
The official mortgage delinquency numbers for April came in at the highest that have ever been recorded and almost three times what they were in the previous worst year of 2008.
Add that to the fact that the only time unemployment was worse than now was in the Great Depression in 1933, we are seeing record numbers of retailers, restaurants and hospitality companies shutting their doors for good and new home and existing purchases were lower than any time that has ever been recorded, and I have to believe that real estate will be next.
I would like to point out that the CARES Act prohibits a bank from foreclosing on a loan for 6 months and that evictions cannot occur for 2 months, both of which are going to delay us from seeing the kind of pain that I think would have been caused already.
On top of this, the Federal Reserve has taken unprecedented steps to give money to businesses in a way that has never been done in our history and there is a chance that these initiatives could prevent (or possibly postpone) the kind of carnage in the real estate markets that the numbers would suggest.
I just wanted to pass this along and take an opportunity to remind you that as a Private CFO, my primary objective is to help to educate my clients on any decision that they make. To that end, consider this... Before the pandemic, in 2019, we set a record for the most business closures in a single year. Victoria Secret announced the closing of 250 stores this year while JCPenney, Pier One, Nordstrom and Walgreens are all closing at least double that amount. When all of these businesses close, imagine how much supply will hit the market and how it will impact commercial real estate?
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