U.S. Market Plunges, Realty411 Experts: “Recession On the Way…”

by Stephanie Mojica

The Federal Reserve slashed its benchmark interest rate to nearly zero on Sunday, March 15, sending real estate investors and the world at large into even more panic over the very real financial threats of the coronavirus aka COVID-19.

This of course drew the overall question of, is the United States now in a recession?

The opinions of experts interviewed by Realty411 on Monday, March 16, varied. However, the opinions all held one common thread — the economy of the United States and the world at large is in danger.

Gena Lofton, a Los Angeles-based investor, speaker, and author, said that she believes a recession officially began this first quarter of 2020, even before the interest rates were slashed.

“It’s highly likely that we will have low to no economic growth for the next two quarters, which is the definition of a recession,” Lofton said.

However, she noted that there are two more important questions for concerned parties to ask:

·      When will it end?

·      Will it be a “depression” or a recession?

“The answers to the above questions are dependent upon the severity (i.e., the depth) [of this economic downturn]; the length (i.e., the number of quarters); and the of fatalities as a result of the coronavirus — all of which will result in financial disasters for a large part of society,” Lofton said.

“It is highly probable that this will spill into 2021, as the money supply and supply chains have been broken for too long. For example, when an economy is chocked for this long without air (money) it is nearly impossible for it NOT to have a recession.

“The example I like to use is it’s like holding your breath underwater, if one does that for too long, they will either die or be unable to function when they do get air.”

According to Lofton, it is important for all investors and other concerned parties to deeply understand four factors:

·      the money supply;

·      the credit/bond market;

·      supply chains; and

·      economics in general

Bruce Norris, president of the Riverside, Calif.-based Norris Group and an active investor, hard money lender, and real estate educator with over 35 years of experience, said a recession is on its way.

“I think it’s [the Federal Reserve’s decision is] a reaction to realizing there’s a U.S. recession coming for sure,” Norris said. “A global one is likely as well.”

In response to a question about how serious COVID-19 is to the global economy in general, Norris said: “It’s [COVID-19 is] the biggest Black Swan event of our lifetime.”

According to Norris, the current situation is worse than the stock market crashes of 1987 and 2008 — but it could be of a shorter duration.

However, “depending on how high unemployment goes, this could impact renters’ ability to make rent,” Norris added.

Lloyd Segal, director of LAREIC (Los Angeles Real Estate Investor Club) — the largest real estate investing group in Los Angeles — also said a recession is on its way. However, he urged people not to panic.

“The best way to protect your real estate portfolio is not to sell!” Segal said. “No panic selling. Hold off on any activity for the next six months until the market stabilizes.

Sam Sadat, founder of Sam’s Real Estate Club in Los Angeles, Calif., feels that the recession for the economy is a recession, but not specifically for real estate investors. “As long as rates stay this low, we will have buyers.”

While panic selling is to be avoided, Sadat says this economic hurdle is the perfect time to re-adjust your portfolio and sell off the not-so-good properties to focus on the long-term winners.

“Save your money and get as much access to capital as you can. Look for bargains and invest in long term small multi-units,” Sadat adds.

It’s important for Realty411 readers to be aware that fortunes can be lost or made during economic turmoil, such as recessions.

“I’m sharing with my members and students that whenever the market goes through sudden upheavals, prices inevitably tumble,” says Segal, adding: “It happened after 9/11 and after SARS, H1N1, and Ebola. But it takes months, not weeks. So, get ready — but be judicious. There will be incredible opportunities in the coming months!”

Sadat says that right now noise will be coming at us from all sides, especially political hype during an election year. With this in mind, he emphasizes a holistic approach: “Keep to the center, sharpen your skills, and observe with maximum awareness of the moment. This too shall pass, and we will be just fine.”

Check back for more updates on this developing story.