COVID-19 and How It's Impacting Home Buyers and Sellers

Hello everyone, this is Keith Robinson, I'm the Chief Strategy Officer for Next Home. We are starting this webinar. I see people logging in like crazy. So we are going to stall just a little bit. I've got my guest today or co host is James Duigens. He's not only my friend, he is also our Chief Executive Officer for Next Home. He and I have been very nearly at distance, joined at the hip over the last two weeks as we've been learning more and more about this virus, what it means and the potential impacts. And so James, thanks so much for carving out some time to spend with everyone today.

Thanks for having me. Super excited to be here and you know, share some outlook on where we think things are going to go in the next 60 days. So looking forward to it.

Okay, well, we'll dig in. Just as a reminder, we've got some real estate industry professionals here. We've also got some of their clients here. We've got everyone from mortgage people to title reps, closing attorneys and just people who own a home or thinking about buying one, all on this webinar. So we're going to do our very best to keep the jargon to a minimum. We'll do our very best to keep the complexities and the inner workings of residential real estate to a minimum. Will give you a high level overview of the things that we are seeing and what we think it means. So without any more delay, James, why don't you tell us a little bit about what we know with regard to COVID 19 and sort of where we are today in time and space.

Yeah, so obviously, you know, I think everybody's aware of what this is at this point point. We're currently dealing with different approaches to solving this and stopping the spread. And we'll show you guys some examples on how different states and even local county levels are handling things. But as of today, the virus is in 199 countries. We have about 93,000 total cases and unfortunately about 1300-1400 total deaths. You know, the US is officially the epicenter of the disease and you know, we've definitely got some, I think we've got some tough roads ahead, but there are some bright spots as well that we're going to go through, you know, to really give you guys some perspective on, you know, what this webinar is about, you know, buying and selling at a local level, which is going to be our emphasis because some areas are dealing with it. You know, there's a stronger impact like New York and then you can Go to other parts of the country where they're having very little impact. And I think that's the foundation of what we're going to talk about today is just really, you know, paying attention to what's happening in your market. There's obviously a lot of news on this and it can be very doom and gloom. But it's important to remember that things are very different in each market across the United States. Go ahead and forward us on this, Keith. We'll go to the next slide. Just to give you guys some idea on essentially what we're looking at here. This is an example of China and their daily cases. We, obviously, China is where it started. They did a very aggressive lockdown in order to slow the spread. As far as we know, based upon the data that they're releasing, that spread has come to, for the most part, a halt. You know, there obviously are some concerns about other parts of China, like Beijing, for example, where they're noticing spread again. But for all intents and purposes, China took the most aggressive approach to slow things down. In the, in the very beginning, they were sort of the benchmark. Italy, number two for a number of cases. And then, you know, unfortunately, the USA has now become the, you know, the epicenter for it. I think that, you know, it's important to understand that this virus is very different from one area to the next. As we all are aware in New York, Washington, here in California, we're certainly having some, some significant spread, but then other parts of the country are not. And that's going to be, you know, part of our discussion is how that's impacting, you know, real estate in those markets. And we'll dive pretty deep into that. Some bright spots while we're talking about it is, you know, there, there's certainly been some, we've had some issues with, with really getting things moving from handling this spread of this virus. We're starting to really get a handle on it now to some degree. You know, there was a lot of personal protective equipment that hospitals were short on. But why I'm showing this to you is that a lot of companies in the private sector are really stepping up. And it's one of the things I love about Americans is that we're very resilient. And, you know, we, we always rise to the occasion when a problem happens. I mean, I read a story this morning about 1,000 hospital workers that are retired have volunteered to come back and help the local hospitals in New York. I mean, that's, that's the kind of stuff that makes this country, just amazing. And so, you know, some of these highlight stories, as I mentioned, are 3M. If you go and look at some of the private sector, even design, fashion, fashion designers are starting to go and create masks. Keith, go to the next slide. You know, this is an example of also, you know, how we're working on developing ventilators. You know, Dyson, you guys know, is the vacuum cleaners are creating ventilators to help. I think this is an amazing thing on how we can help solve some of these issues. Next slide. As I mentioned, you know, we've got different types of companies that are coming in to create masks and gowns and really help, and really help the hospitals and our, and our frontline workers. I think that's one of the things that we need to pay close attention to as Americans is that we have our first responders and it's nurses and doctors and it's, you know, police officers and ambulance people and they're just, they're all doing what they can to help. And there's. We're going to get through this like it's a matter of, you know, us as a country wrapping our heads around what we're dealing with and you know, working together to make it, to make a fix of this problem. Let's go to the next slide. You know, this is what we call the shelter in place and essential versus non essential. So you can kind of see where, you know, there's non essential business closures. As of right now, every state's handling things differently based upon the number of cases. I would tell you, and this is just more out of a side of caution, it's no secret at this point that the testing is really lacking in a lot of parts of the country. So I would take sort of the number of cases with a grain of salt. But it does give you at least some idea on how different states are handling this as well as the federal response to the virus as it unfortunately continues to spread. Let's go to the next slide. So what we want to do next is really kind of dive into the effects on real estate. And I'm going to turn it back over to Keith and let him jump in on some of these things. And then we'll come back to a few other points that I want to talk about with both taxes and the stimulus package. So, Keith, take us away.

Okay, will do. And James, I just really want to echo what you said. I know this is a really tough time and it's something that all of us in the country are processing to Differing degrees depending on where you're listening to this webinar. But our country has a long history of rallying in times like this. And I believe very strongly with some of the things you've shown where private business starts to get involved and automakers that are now switching some of their assembly lines to develop ventilators and key essential needs, this flattening of the curve is really to buy time for the medical infrastructure to prepare for what's coming. And that's a, that's rare that you get forward warning of something that is coming to state or coming to a country. So while it is incredibly hard in New York, Northern California, where James and I are, Seattle and other places, Louisiana, there that we are, we have early warning now and the country is responding in a way. And I think that that bodes well for the coming weeks and months.

Agreed.

Here is basically what this means for residential real estate specifically. And as James mentioned, and we will reiterate, this varies, not only state to state, not only county to county, but probably city to city. Some areas are, it is very close to business as usual. They are still showing property, but they're using masks and gloves and hand sanitizer and following all of the appropriate safety measures. And then in other areas where the state has deemed real estate non essential, basically it's completely stopped in some areas you cannot record, you literally cannot record. The county recorder's office is closed and all of those transactions are actually completely paused. So it really, really varies. You're going to hear us mention this several different times, but it's so important right now that you are touching base, checking in with your local real estate professional, your local mortgage professional, those local boots on the ground are going to have the absolute most accurate information for you. We are going to speak at a higher level, but our belief is that this will be steep. This will be painful, but it will be short. Most of the countries, if you use the statistics that James showed us earlier on those graphs, most of the countries tend to get their arms around this within 60 days to some degree. And so what we're having is this pause button that's been placed on residential real estate for a period of time. The jobless claims number came out yesterday. It was the largest jobless claims number in the history of the United States. So that's significant and obviously something to be aware of. We saw a 3 million, 3.28 million, almost 3.3 million jobless claims spike that, as you can see on this graph, is a spike that you can't even Measure in percentages. You've got to measure it in multiples. It's 4 and a half ish times larger than the biggest one we ever had. There's no way I can sugarcoat that and make that sound like it's a positive thing. It's not, but it is different. What we had in 2008 and 2009 and in our. Our generation's Great Recession was this death of a thousand cuts, where it was 500,000 one month, 600,000 the next, 400,000 the following, 700,000 the month after that. We had this constant erosion of our economy and of people being able to work. This is a very steep, precipitous drop. And it is painful, especially in certain sectors and in certain job sectors and in certain parts of the country. But just to put some of this into context, there are 3.28 million jobs that were lost, or people who claimed that their job was lost, but there are 15.2 million leisure and entertainment jobs in the United States. And that whole industry just had the lights shut off across much of the country in the last 10 days, 14 days. So it is a real number, and it is painful. And if your close friend is a bartender whose bar had to close, it's rough on them. And I don't want to pretend like it's not. But put in its whole context, this is something that shouldn't be around. Like, take three years to work through the system like the recession that we had in the past, and they can get back to work. And put in the context of what is going on, I don't want to say it's not bad. It is bad, but it's. It's not as bad as it could have been.

Yeah. And Keith, can I interject on that real fast?

Please do.

Also, you know, the thing to keep in mind is as we jump into the stimulus stuff that we're gonna go through, you know, you need to remember that the government is trying to get employers back on their feet. That's their goal. So as I go through some of the stimulus package, the idea here, as the unemployed should be able to. And this is a theory, I'm not saying this is gonna happen exactly, but what they're trying to do is get the back on their feet to rehire these people and drop that number down. So just in what I'm. What I'm going to explain to you is you're going to see this jump again. And don't freak out, because when we talk about where we think the economy is going to get turned back on in theory next month and the stimulus plan begins to roll out that the hope is that these spikes will obviously come down and the unemployment rate will come down with it. That's what they're trying to do. So I just wanted to some context that it's going to look high but as soon as we get the jobs back, get people moving, this is going to also reflect in housing. So.

Yep, totally agree. And there is a lot of information on various governmental plans to reduce the expense load. Right. So the the revenue side for people's personal P and L just got impacted in a big way because they went. They're now in unemployment and their income got cut. What the government is trying to do is release different things to handle the expense side for folks. One is student loan debt. There is a break on any and all of these. It's so important. Please, please hear this. You can't just not pay it. You've got to communicate with whoever holds the loan note and communicate with them. But all of them have been given an edict to provide forgiveness and provide forbearance. Forbearance just means you don't have to pay right now. You're going to have to pay back at some point. But we're going to give you a breather on the financial obligation for this particular loan and student loan debt. For those of you that are listening that have student loan debt column, talk to them. Check out their website. Maybe there's an automated way, but I know of several people in my life who have made those phone calls with relative ease. They have gotten these payments abated and they will have to pick it back up later. But student loan debt, if you're a doctor, a lawyer or any other career track that required you to take out a lot of student loan debt, there are solutions for that payment for a period of time. Another example is credit card issuers are also in a place where they are offering support. Again, you must call them or look on their website, figure out exactly how they're handling it. But there are many credit card holders are offering flexible bill payments, waiving late fees, interest, etc. So this is also a component that you should take a look at and pay attention to. There's also some eviction protections for renters. This one can get a little complicated, especially if you're listening to this and you're a small business owner of residential real estate. As an investment, you're going to want to check with a local real estate attorney, get some understanding on exactly what this will mean. For you. And if you are a renter, of course, if, if you've got a big corporate landlord that owns multiple properties and a lot of doors across the nation, they'll be pretty set up to handle this. If you, if you are renting from an individual that just happens to own an investment property in your local city, it's time to get on the phone with them and talk to them if you need to, and work out a plan for both of you that will make sense. So there are a lot of conversations that are having in and around rent and in and around housing costs and expense. And it's just a high degree of communication is really, really important right now.

And this is in New York too, by the way, just to be clear. That's, you know, the Bay Area, New York, basically. I, you'll see this more common in areas that have a high impact of COVID 19. So just like he's saying, you know, communicate. We're all in this together. And I think most businesses understand the trickle down of all of this. So it's just keep very high communication with everyone. And I'm sure there's ways you can work things out.

Yeah. And I know it's not fun to sit there and think about having to make these kinds of phone calls and sit on hold with the student loan, whoever the student loan note holder is. And I don't like sitting on hold as much as anyone in the plan. But this is that time. This is the time to look at those kinds of things. There's also, we won't go super into specifics, maybe another webinar for another time. But there are mortgage payment workouts as well. There are, there is the ability to get a deferment on your mortgage payments. I do want to encourage you, use it if you need it. If, if the whole country decided to stop paying their mortgage payments, that would push us deeper into a recession. So, so I'm not recommending that. Please don't do that. That would be bad for all of us. If you need the assistance, it's there for you. So if you, if, if you, if you or someone you know is at a place where you need it again, you must talk to your bank. You got to talk to the servicer of your loan, reach out to them. There is a structure for it. At a minimum, you can get two months where you've got time to figure it out. And then some of the programs, depending on the loan that you have, are up to one year. Most are six months of flexibility. And two months is Pretty easy to get work through. So again, high communication, very important. But I do want to reiterate, please. If the whole country decided not to pay their mortgages for a few months, it would be really hard on the financial institutions. Not that we need to feel sorry for them, but the biggest piece is it would push us deeper into recession, which would be bad. So if you need it, it's there. If you can work your way through it or you kept your job, try your best to keep things as they have been.

And just one more, just to reiterate one more time, you need to call them to do that. Don't just stop making your payments.

So correct on any and all of these, anyone you owe money to, you can't just stop paying them and not talk to them, right? There are workouts. And again, this is the government's attempt to put downward pressure on the expense side of our personal balance sheets. So because they know for a lot of Americans there has been downward pressure on the revenue side of our personal balance sheets. The liquidity issue is actually what I was just referring to. So if a bunch of people stop paying their mortgage, I'm not going to get hyper technical. If you want to, you can email me and we could go on and on and on with a virtual happy hour about how this works. But from a high level standpoint, for many, many, many of these loans, if the consumer doesn't make their payment, the bank still has to make the payment to the secondary mortgage market. They still have financial obligations whether or not the payment is made. And there wasn't any language in these notes for a federally mandated delay right where they had to make it okay. There's no structure in place. Cause we've never done this before. So right now there is a really rough liquidity issue. And what the biggest thing we want people to know is if you are a buyer that's in the market or a seller that is in escrow, if you haven't touched base with your lender in the last few days, it's time to double check that pre approval. If you're a buyer that's gonna be entering the market right now, you need to make sure you're still good. If you're a seller that is going on the market, or if you're a seller especially that has one in escrow, it's time to double check. Because this is an issue, it will be an issue for a period of time, I believe. I'm very confident that there will be a solution, a workout. The government is working this Everything's moving so fast. The government didn't think this part through in what they were doing to help Americans. And now there is a new problem that has popped up and they are working on that, that that nationwide game of whack a mole. And this is a problem that they are going to work on finding a solution for. And the reason that the government did what they did for Americans was so that they didn't tank the economy or it would have as little an impact on the economy as possible. I believe pretty confidently they're going to try to find a solution to this as well because if this happened, this would also tank the economy.

So, yeah, well, and Keith, they're going to do. They did one stimulus round and we know that they did what they could to get money into people's pockets. So the, the think of it, tier one, the consumer that pays tier so now that the consumer has got money in their pocket and they get to defer payments, as you're making the point, banks still have to make those payments to the secondary market. And if they're having to make payments and there's no liquidity for them, essentially money to lend because they're having to make sure they have enough to make those payments, then it could possibly cause an issue with you. Getting a mortgage is the short version. And point is there's going to have another stimulus package. I would assume it would make logical sense that they need to shore up the banks to make sure the banks have enough money to still lend you to do a loan as well as make sure that they can deal with that balance sheet issue.

So, yeah, there are discussions right now it is not set up, but there are discussions right now on setting up facilities for banks to go and borrow money so that when they need it, they can make these payments to the secondary mortgage market. So they're working on this problem right now. But what that means today, in the near term, over the coming few days, maybe week or weeks, it's always really important. You have a high degree of communication with your local residential real estate professional, your local mortgage professional. But especially on the mortgage side, it's very important right now that you are double checking how everything is going, especially if you're going to be entering the buyer's marketplace. And I know that might sound a little crazy, like really, are people going to buy a house with what's going on right now? Remember, some parts of the country, it's kind of business as usual with some extra safety precautions. So, yeah, buyers are entering into escrow today. Tomorrow and the day after that. So transactions are still happening across the country. So it's really important that you double check, get with your loan officer, whoever you have your pre approval with, and have a discussion with them just to make sure you're still in good shape. Part of that liquidity crisis that I just talked about has made mortgage rates go crazy. I love the roller coaster imagery that we put on this because that's what it's been. The Fed reduced the fed funds rate, which we'll talk about a little in a minute. But normally not always, but they tend to trend together. Not always, but they can. And early in the month they were. And then because of all these liquidity concerns, because this huge pipeline of refinances that entered into the mortgage space, plus these liquidity concerns with these deferments on house payments, basically one way that banks can control how much is coming through is to raise price if the price goes up. Basic economics, right. If demand stays the same and price goes up, you'll sell fewer apples or in this case mortgages. So that is, rates have actually gone up. I believe we will be in an upward trending rate environment until there is a solution for this secondary mortgage market liquidity issue. So rates have been pretty volatile in the last month, I think we, it's safe to say. My personal belief is we are in an upward trending mortgage rate environment until that liquidity issue is solved. Banks are really nervous on how this is gonna be handled and they aren't super excited about doing tons and tons of loans and then having people not pay those loans in the first two or three payments. So again, upward pressure on rates, that is reality for the near term until this liquidity problem is solved, which in time I believe it will be. So is this 2008? In a word, no. 2008 was. No two recessions are ever the same. And this is the case on this one. Are we going to enter into a recession? Yes, yes, we are. All recession mean is two consecutive quarters of negative gdp. For sure, this quarter will be and the next one will be too. So that is a reality. But is this going to be like 2008? No, because what happened in 2008 is housing is what pushed us into a recession. And we had three plus years of pain that we had to work our way through in order to push and flush those loans and the other issues out of the economic system. It took a very long time for that to work its way through. This one is an outside event that is pushing us into recession. 9, 11 was a really, really hard time. And that is another time where an outside event pushed us into a short recession. It pushed us into some economic trauma. This coronavirus has come at a time where the economy was really robust, really healthy, Jobs were great, consumer confidence was high, incomes were up. We were feeling pretty good. There were some early indicators that it was starting to slow down a little bit and people were starting to prepare for maybe a slowdown in the economy. And then bam. Coronavirus hits and this external force puts a lot of downward pressure on the economy. But eventually, and in a relatively short period of time, this external force will work its way through the system. Not in three and a half years like 2008, but probably more like again. I don't mean we'll be all better in three and a half months, but we will start to be back on our feet and moving again, measured in weeks and months, not in years. So this is not 2008. Don't let recency bias be something that creates massive fear for you. That being said, if for the folks who have lost their jobs because of this, it sure feels like 2008 to them all over again. And that's a really tough spot to be in. And hopefully they can get some solace in the fact that it should be short.

I just wanted to make a point as we go through this that, you know, when we talked about the. Is it Comparable to 2008, as Keith was mentioning, this is very much as we're. We're going to talk about go through. It's more of a. More of a short. It's kind of a sharp drop. And then we think it's going to come back very quickly. There's still 4 million units short of housing in this country. Therefore the market is still very good versus we're still under supply versus oversupply when we were dealing with 2008. So just from sheer economics to supply and demand, we're in a very different type of economy and downturn from that time frame. Let me jump into government intervention, Keith. I'm just going to run with this. Hopefully you can continue to hear me. So obviously, as everybody knows, the government is very acutely aware of the fact that without people working, economy goes off a cliff. So they passed a massive stimulus bill. Everybody knows that it's $2 trillion. They're going to continue to intervene. And I believe you're going to see multiple things occur over the next month. As Keith mentioned, liquidity issues in the market, potentially, the government will certainly come in and try to shore things up. So I think what you're looking at is the first of many phases of intervention in order to get the economy shored back up and moving forward. Let's go to the next slide and we'll talk about some of the tax stuff that we have happened. So first, I want to be very clear. I am not a cpa. I happen to have talked to a cpa, but I'm not a cpa. If you want to have tax advice, contact your cpa. That said, it's taking me a little bit of time to get this information. So this is a very good analysis on specifics. But if you have specific questions for yourself, you need to contact your accountant. First of all, the tax delay is, is all taxpayers, meaning individuals, trusts, estates, partnerships, associations, companies or corporations, regardless of whether or how much you or they are affected by COVID 19. So it's, it's all encompassing. The first is for a taxpayer with a federal income tax return or a federal income tax payment due on April 15, that due date for filing and paying has automatically been postponed to July of this year. And that's regardless of the size of the payment that is owed. The taxpayer does not have to file the form 4868. What that means is the automatic extension for individuals or Form 7004, which is for automatic extensions, you know, for certain other automatic extensions in order to get that to occur. The relief is for federal income tax payments, including tax payments on self employment income and federal income tax returns that are due in April for the person's 2019 tax year, to be clear, and federal estimated income tax payments, including payments on self employment income, again due on April 15 for the person's 2020 tax year. Again, I'm getting specific here. For those of you who understand this, it'll kind of make sense. For those that don't, we'll send this document to you and I would encourage you to talk to your cpa. There is no extension is provided for the payment or deposit of any type of federal tax, that is the estate or gift taxes or the filing of any federal information return. And then most importantly, as a result of the return filing and tax payment postponement to July 15, that period is disregarded in the calculation of any interest penalty or addition to tax for failure to file the postponed income tax returns or pay the postponed income taxes. So again, this is all just kind of what we've, what we garner out of this. The final thing that I got today, which I thought was interesting, was for those of you who have self health savings accounts The IRS has announced that payments from an HSA that are made to test for or treat COVID 19 doesn't affect the status of the account as an HSA basically does not cause a tax for the account holder even if the HSA deductible has not been met. So vaccinations and things like that still continue to be treated as preventative measures that can be paid for without regard to the deductible. So that's the general gist of it. So I'm going to simplify. Basically, if you're a federal tax, you file federal tax returns, you pretty much have been delayed to July. There's specifics in there, but the idea here is for you guys to be able to hold that money in your possession if you, if you owe money. But on the same token, if you guys think you're supposed to get money back, you should file your returns as soon as possible because then the IRS will obviously refund that money quicker. So, you know, you can work with your CPA to determine whether you owe or need to pay and then you can, you can decide to defer or get that money back as soon as possible. Keith, you want anything to that?

Yeah. If you owe, delay. If you don't file.

Yeah.

Get that cash in your hands and help the economy get back on its feet.

Yeah, yeah, yeah. All right, so let's talk about the stimulus plan. I have spent an enormous amount of time trying to figure out what was in the 880 page bill. So I'm going to give you the best that I possibly got out of it. I think it's fairly accurate. I'm pretty confident is. But again, you know, you want to possibly just keep your eye on things because sometimes this stuff is written and then things are slightly modified as the government figures out things they did right or not. So here's what we got. The stimulus plan, it's a one time direct payment of up to $1,200 for individuals and $2,400 for couples with $500 added for every child under the age of 17. This is based upon your 2019 tax returns for those of you who have already filed them and for those that have not, it bases it upon the 2018 tax return. So it's really important. If anybody, for whatever reason, didn't file one or the other, I would encourage you to make sure that gets done. So you get the highest amount possible. The benefit would start to phase out at above about $75,000 in income for individuals and 150,000 for couples, it goes away completely at the $99,000 mark for individuals and 198,000 thresholds, respectively. So the idea here is they're going to give everybody money in their account to help, you know, cover expenses and essentially stimulate the economy. This is also true for those who have no income, as well as those whose income comes entirely from non taxable benefits programs such as Social Security. So in other words, everybody's going to be getting this stimulus. In addition, the federal government has also going to be adding $600 a week on top of the state benefits for people that are unemployed, so that your state benefits kick in and the federal government's going to add $600 on top. It also extends those unemployment benefits through December 31st for eligible people. The good news is that this deal also applies to self employed independent contractors and gig economy workers, that is people that work for Uber or Lyft, et cetera. The stimulus measure, if it's passed by the House today, I haven't looked yet. I don't know if it has or has not. It would be distributed via the irs. And as I mentioned before, it's going to use the 2019 tax returns or your 2018 tax returns. And the final amount of the benefits, which is interesting, is going to be determined based on 2020 income and settled on the 2020 tax return. So essentially, people who ultimately qualify for more money than they receive this year, a person whose income drops from, for instance, let's say 100,000 to $70,000, they would get the rest through a larger tax refund or a smaller tax payment in early 2021. This is something that no one's actually looked at yet. So essentially, you know, people who ultimately qualify for less money than they got this year would get, but they wouldn't have to pay it back. For low income Americans who don't typically file taxes, they would still need to file a form. People receiving non taxable income would still get the checks. So again, people receiving Social Security benefits will also get a payment. Two things to note is that you don't need to download any software from the IRS or use your tax account to do this. The IRS is essentially making two paths available for filing. One for those making under $69,000 and another for those making above 69,000. Both of those can be found on IRS.gov so that's where you can go to get that information. The Treasury Secretary says that they're expecting to get the checks in people's hands within three weeks. I would take that with a grain of salt, if you want my personal opinion. You know, essentially there's a lot of issues with getting that to occur and there's a lot of talk about whether the IRS can actually do it that quickly as an example. So if you were people who are planning on receiving paper checks and have moved, for example, since they filed their last return, you need to submit a change of address form to the IRS that typically takes four to six weeks to process. In other words, getting that check in three weeks is probably going to be difficult, depending upon your circumstance. But for the vast majority of Americans, there really isn't any action to do on your part, except you're just going to receive the rebate check. And again, you know, this is also people of the lower income individuals. If you have direct deposit, the IRS will do it even faster and there really isn't a whole lot much to do there. So that's the general gist of it is one time payment. If you are unemployed, they're going to add $600 additional on top of your state benefits. You need to figure out what those benefits are at the state level to determine what your income would look like. A general rule of thumb, from what I've understood, at least here in California, I should preface is, it's usually around 60% of your income. So, you know, again, just talk, look at, look at what the local state's going to be doing for you on that benefit.

James, couple one comment. The stimulus did pass. The audience members told us that. So that did just pass. If I had, say, lower income in 2018 and more income in 2019, is your understanding that they're taking the lower of the two, or how is that handled?

They're going to take whatever the lower of. They're going to take your 2019 tax return if you filed it, and they'll use that. If they don't have anything on file, they'll go to 2018. But when you readjust it and you file, they'll give you the additional income. So it's going to basically apply once they have the updated number, is my understanding at this point.

Okay. And then just we refresh. If someone doesn't make enough income to file a tax return, there is still a pathway for them, correct?

That's correct, yeah. And again, you need to go to the IRS.gov to fill that out. Correct.

All right.

I'm not a cpa. I just want to make sure things that I have been told by a CPA in my own research. If you have questions, call a tax advisor. They'll help you through this. Yeah.

Just one more clarification because I think that some people might have missed this or not understood. So theoretically, let's say my state unemployment check would normally be $500 and that's what I would qualify for. The Fed is then giving an additional 600 bucks. So I would get an unemployment check for $1,100. Is that accurate?

It's $600 a week on top of their state benefits for up to four months. Is my understanding correct?

Okay, awesome. I was just clearing out some of the questions because I knew you were in that. In that zone.

Yeah.

I'm going to talk a little bit now about home values. And this is obviously something important to all of us who own residential real estate as a holding, right. Whether it's your primary residence, investment properties, or both. Here is the thing. Real estate tends to move at the speed of paper, not the speed of the Internet. So it values change in real estate really slow, certainly compared to something like the stock market, which has been incredibly volatile and was down a fair amount before we logged in today. Maybe with the passing of the stimulus, it rallied a little. But home values move much slower. And so will this have an impact on values? The answer is yes. Will it have an impact in New York, in San Francisco Bay Area, in Seattle, in some of the hotspots? Yes. But the silver lining there, not that it's good news, but the thing to remember is that this should be relatively short, even in some of the more impacted places. So what that will translate to is will it be downward pressure on price in some parts of the country? The answer is yes. It shouldn't be downward pressure on price for a very long time. Again, like I referenced before, it took us more than three years to work through the issues that we had in our economy in 2008. This isn't that. So downward pressure on price for a little bit, sure. But will it come back? Yes, it sure will. And if you would have bought on the worst day in 2008, in 2018, it looked like a good financial decision. So real estate should always be a longer time horizon. And for the owners of homes, remember, you only lose that money, quote, unquote, lose that money on paper, you only actually realize that loss when you sell. So unless you're planning on selling, I wouldn't be over obsessed about your home values. It's something to be aware of for sure. And if you are considering selling, now is the time to talk to your local real estate professional about exactly what this impact is having in your local market, because there are some markets that have been relatively unfazed so far and there are still multiple offers and things are just as crazy as they were 10 days ago as far as the real estate market is concerned. So every person listening probably has some different impact on their home values in their local market. And then let's talk about a recovery. Things that fall very steeply, like our economy based off of the coronavirus, tend to rebound relatively quickly as well. I do think this one is going to be traumatic enough that it's not going to be this V shaped recovery where it goes down a lot for three months and then it comes back in seven months from now we're right back where we were. I think this is relatively traumatic to the market, though it will be brief. I think the recovery will be more U shaped, but I don't think it's a capital U. I think it's a lowercase U. I don't think that on the screen you see the shape of the U. I don't think we're going to have a long bottom that's going to go on for years like 2008. I think we will have a bottom that has some length to it. And as people start to get back on their feet and start to become more confident about the economy again, we'll start to spend money again. And that is where you will really see this U shaped recovery. And then, you know, it's, it's a little. I don't want to talk about opportunities in markets like this or when pandemics are going on. I think we should be focused on our safety. But there is, this is. Warren Buffett is as philanthropic as they come and this is his quote. Be fearful when others are greedy and greedy when others are fearful. If I was a buyer of residential real estate who had been for the last six months getting kind of beat up by the market, there will be fewer buyers competing. And out in the space now, if you decide, hey, I'm not like, no, Keith, I'm hunkering down right now. I'm taking care of me and mine. I fully respect that. I do. And if you said no, I'm willing to at least explore what that could look like in these given market conditions for my city. I also think that's an appropriate response. So there are going to be pockets where you can perhaps make some real estate moves that maybe you couldn't have made just a couple of weeks ago. We're going to run through some of the common questions and James, why don't you be the reporter and you interview me. I'll let you ask me these questions.

Sounds good, Keith. Should I wait to list my home?

The answer is maybe. Again, I want to reinforce that some markets are wholly unaffected as far as their real estate market is concerned. And it would be a bad idea to wait. It might be a great idea to list. There are also other markets where it might make sense to continue to evaluate what's going on. And then the other thing I would overlay across the top is most of us move because of timing in our life, not timing in a real estate market, at least for our primary residence. If you have investment property, that's a different discussion. But as far as timing in your life, if you got a new girlfriend and you now have three kids instead of one, and you're living in a two bedroom apartment, it might still be a good two bedroom condo. It might be a good idea to still try to figure out how to trade up because sheltering in place might not work out so well. Right.

Add an idea here that potentially in certain markets there might be less inventory and if people are still wanting to buy, then you've got less competition to do so. I think it's very market dependent. Yeah. And I've talked with offices all over the country over the past week and literally COVID 19 is either affecting places on a pretty severe level or not at all. So I think it's really important to talk to a local agent to understand what is truly happening, what is the severity of things and what is the right time on that. And back to your previous comment about Warren Buffett, you know, just there's a lot of opportunity out there, so it is very specific to circumstance.

Very. Yeah. Now more than ever you need to really be seeking wise counsel from the professionals on all of these questions because it is hyper local and hyper dynamic and changing really by the day. All right, hit me with the next one.

So is this going to make prices come down?

Depends. I'm not saying that as a non answer. I'm saying that because as we just talked about, it really depends on what's going on in your local economy. Will I say this in general? Will it put downward pressure on price across the nation? The answer is yes. But in 2008, if you were in Williston, North Dakota, you actually saw a boom in property values because that's where the jobs were and people were flocking to North Dakota in droves to take those jobs and they simply didn't have enough housing. So in general, will this put some downward Pressure on price for a period of time. Yes. But does that mean it's going to put downward pressure on your primary residence? It really depends. And remember, even if prices do go down, it could be an opportunity. If I was a buyer, I'd be paying attention. It might be a good opportunity to jump in. If I was a seller, I only realized that loss if I sell.

Yeah. And then again, just to add the context to it, it is again going to be local based. So, you know, New York is struggling right now. I think everyone's aware of that. But if you look at parts of other parts of the country, there's just nothing's changed. Multiple options are still occurring. So you have to just pay attention to what's happening in that local area. The other thing to keep in mind is some places might get slightly worse with COVID 19. Some places won't. Some places also might get better very quickly. Like it just. There's a game here of timing on all of this and you need to talk to somebody locally to determine that.

Yep, hit me with the next one.

Yeah. So what will this do to mortgage rates? What are we talking about here?

Yeah, so as long as there are the issues that I mentioned earlier on the secondary mortgage market and these liquidity issues that banks are facing, one of the ways they're trying to limit the volume is by raising price. So one way to sell less of your product is to raise price. And for a mortgage that's a rate, I think this temper tantrum of rates that we experienced over the last six weeks probably will not continue. I think in general rates are going to trend up. I know it's been a pretty crazy time in the mortgage industry and I think rates are going to trend up until there is a solution to this liquidity issue. So if you. By the way, this isn't really in this part, but I want to add it. If you're a buyer who's out in the marketplace and you have a pre approval and you haven't talked to your lender in the last 48 hours, you need to talk to your lender and check in with them and not get fully re preapproved, but just find out what may or may not have changed. There are banks that are hitting liquidity issues and they're trying, working very hard to find solutions to that. But it is causing some pain in the marketplace as far as extensions of escrow failing to close. Some are feeling pressure to close sooner. So there's a lot going on there and it's primarily because of this Liquidity, liquidity issue that I talked about before, which will also put upward pressure on rates in the near term. And then I think when that liquidity issue is resolved, there is a lot of banks would like to lend more money. That's how they make money. So I think once that liquidity issue is resolved, and hopefully it will be, or we could have another problem here. But once that is resolved, then I think you will see rates start to come back down. But in the near term, I believe with a fair degree of confidence, we're in an upward trending rate environment.

Yep. So as a seller, can I be held liable if I let people in my home?

Yeah. Well, first of all, let's start with anyone could sue anybody anytime for anything. And I will almost guarantee you there will be lawsuits that are filed because of, of someone getting infected because of going in someone's home or an open house or a property showing. I can almost guarantee you that that will happen. I think you've got to be really prudent. If you're and it also depends if you're at a shelter in place area where real estate has been deemed non essential, then you are consuming massive risk. If you show much more risk than if you're in a non shelter in place or in a shelter in place. But real estate is deemed essential. So I know we keep saying this, but it's because there isn't just one answer for the nation. There rarely is when it comes to real estate. But now more than ever there it just isn't the case. So if you're at a shelter in place and real estate's deemed non essential. Yeah, you're consuming some liability if you let people into your home. If.

Yeah. Just to add to it because we had a question from the audience about this kind of reversed. As a potential home buyer, will the coronavirus affect me physically viewing a home? The answer is yes, obviously. But what I also wanted to make a comment is I think you'll see some disclosures that will change too. As far as if somebody had COVID 19, that'll probably be a disclosure item fairly quickly if it's not already, you know, there's probably some hold harmless documentation you'll sign if you're going to do it. If you're going to look at a property even when things get lifted and we're starting to able to move around more, you know it's going to be very common as a buyer that you will probably be requested when you view a home to wear a mask, wear gloves, use hand sanitizers don't touch anything. Like I think that will be the new norm for America for a while until we get, you know, rid of this. So that I think just to add this point, it's going to move again soon. We'll be able to sort of get back to some sense of normalcy. But the social distancing and the way that we are being safe around each other and in people's homes will certainly be different than what it is today. And you will certainly sign some sort of hold harmless in order to view properties and things like that.

Yep.

So yeah.

And any real estate professionals that are on this, if you we did an interview yesterday with an insurance provider on insurance and disclosure. You can email me keithexthome.com we'll be happy to share that link with you. All right, what's the next one?

So how do I qualify for a loan if I have been off work.

Due to COVID 19 yeah, so this one is complicated and it is. The short answer is, again, it's going to depend. And I know that doesn't provide a lot of clarity, but let me just give you a couple of case studies. And let me also start with I'm not a loan originator. I'm not an underwriter. I don't run a mortgage bank. But I'm looking at what happened in 2008 to provide some guidance for how bankers are going to react to this. If you are someone who for a decade has had a job and has paid your bills and then for two months you didn't have a job and then you got your job back and you are employed again and it's up and running, I think it's going to be much easier for that person to provide a letter of explanation. An underwriter will understand. And it will be less impactful for that individual than say, someone who has had spotty work history prior to this, then lost their job, maybe has some late payments and some other things. So I do think that pendulum is going to swing back a little bit more towards conservative lending practices for a period of time. And then as this becomes something that we understand better as financial institutions, then I think their comfort level with understanding what happened will work its way through. There are people who had in 2008 and nine that had many, many, many missed mortgage payments, but their credit score came back with some relative speed. So to really answer that question, you should get with a mortgage professional in your local marketplace. But I do know this banks make money by lending money. They want to lend money to people who have a history of paying it back. And they tend to get understanding and creative when they are at a place where they're ready to loan money. So this is something that's impacting whole swaths of the country. And it's just something that you gotta be prepared for and be aware of. All right, what's the next one?

So what are drive by appraisals and how accurate are they?

Sure. And I even saw someone mention that appraisals are looking in the rearview mirror and you know, what's the, what's the windshield going to look like? Let's start with this drive by. The appraisal marketplace was changing prior to this illness hitting our shores. The opening up of data and the access to data has made it to where like if, if it was a new home subdivision that's been around for six years and you, you've got a ton of comps and there are a bunch of model matches. Some banks were even waiving and not requiring an appraisal on those homes. So there's enough data in some markets where the appraisal requirement was being waived and not in general, not across the board. Most of the time you need an appraisal. But there were also times where they would order a drive by appraisal and not a walkthrough appraisal. Drive by appraisals have been around prior to COVID 19 showing up. That is something that the mortgage that the appraisal industry has provided. I think you are going to see an increase in this. How accurate are they? Of course they are less accurate because who knows exactly what's happening inside of that home. And I do think in some markets, New York, California, Seattle, some of the ones we mentioned, New Orleans, it's going to be harder for appraisals and they're going to be trying to figure it out. And I have some friends that are appraisers who said, I'm not going into houses right now. They are consciously making the choice to protect themselves and that's their right. And so. But there are others who are like, I'm cool, let's go. I'll protect myself and go. So drive by appraisals are obviously less accurate than a walkthrough appraisal. I just don't want people thinking that this is some brand new thing that just showed up because the virus showed up. We have had drive by appraisals for a very long time.

Time. So is it free to get a loan? Fed rates dropped to zero.

Yeah. So this is my Personal Don Quixote esque mission to educate the masses. When the Fed drops rates, then the market reacts and based off of the market reaction, then mortgage rates will move. They are correlative but not causal, meaning the Fed rate dropped to zero and rates actually are in an upward trending environment because of the liquidity issues and some other stuff that I just talked about. So it is not free to get a loan. Your interest rate will not be zero. In fact, your interest rate today is higher than it would have been on the day when the Fed dropped the rate to zero. All the Fed rate means is the dollar. It's what they charge to lend money to other banks when they need money to lend money to us. So and for that Wells Fargo will pick the bank of your choice, pays the Fed to borrow that money. Right now those banks don't have to pay the Fed to borrow money to make a loan and the Fed is doing that so that in hopes that it'll make it easier for all of us to borrow money. But because of the loan forgiveness stuff that or not forgiveness, the loan deferral stuff that has created a liquidity issue. And banks don't want to lend because they're worried about their credit lines and the liquidity issue. So it's actually putting upward pressure on price. So it is not causal. When the Fed moves rates, it is not free to get a loan today. It's actually a little more expensive or more expensive, maybe not even a little than it than it was a week, 10 days or two weeks ago. So what do you do? The real answer is you've got to seek wise counsel. I know you've heard us say that multiple times, but this is the time to over communicate with your mortgage professional. If you're in escrow, it's time to over communicate with your real estate agent, your mortgage professional, your, your title and escrow or closing attorney. This is the time for you to, to really, really ask questions. If you're curious about values on your home, now is the time to talk to your favorite local real estate agent. If you're curious about your refinance or refinancing or what that's going to mean, today it's time to talk to your favorite local mortgage professional. You've got to seek because it's so hyperlocal and it's so different. It's never been more different in markets. There's never been a less clear national answer to what's going on in my career, my 21 year career of leadership in residential real estate it's never been more hyper local than it is today. James, what's your advice for what people should do?

Yeah, I mean, I think I agree with you. This is such a moving target. All of this stuff is changing by the hour that I think you really need to find the professionals that understand what's going on locally. Your real estate agent, your cpa, you know, some cases, maybe even your attorney. But they're going to tell you whether you know, whether it's a good time to go and whether it's not. I mean, I'll give you an example we have. Brad Gill just sent me a comment that I thought was interesting. He says, we just helped a buyer in Santa Clara get into contract that had for the last two months ridden eight offers and missed out on so many homes. And she is so happy and so is the seller all around. This is a great opportunity for some buyers. Point is, it's so specific to your market. So you've got to find your network of people who know more about this than you do, lean on them hard and heavy and get their advice. And they're going to advise you whether, look, now's a great time, keep going. Or they might tell you that, wait two months. I don't know. It's going to be specific to each individual city based upon what it is. The other thing to keep in mind is the other comment I'll make is while some of these cities are going through Covid on a very aggressive basis right now, others are not. That will shift. Some cities that are dealing with it hard will move out of it, and then some cities that don't have it might get it. So the timing part is really a moving target. And again, that's why these local professionals talking to your realtor, your cpa, et cetera, can help you with a lot of this.

So couldn't agree more. All right, James, thank you for your time. I know you've got a lot that you are leading through, and I want to appreciate all the attendees for your time. We are really committed to keeping communication high, to continuing to get content out for the human beings to buy and sell houses for anyone in the industry. And then of course, you know, we've got a lot of our people here that are on this webinar as well, and of course, for you guys. So please, everyone out there, stay safe, whatever that means for your given area, know that we're here for you as a resource. And if there's other things you'd like to see us cover, communicate, talk about, explore for you let us know. We love you a lot. Everyone be safe. Talk to you later, guys.

Bye.

Thanks again, James.

We'll see it.

19 showing up. That is something that the mortgage that the appraisal industry has provided. I think you are going to see an increase in this. How accurate are they? Of course they are less accurate because who knows exactly what's happening inside of that home. And I do think in some markets, New York, California, Seattle, some of the ones we mentioned, New Orleans, it's going to be harder for appraisals and they're going to be trying to figure it out. And I have some friends that are appraisers who've said, I'm not going into houses right now. They are consciously making the choice to protect themselves and that's their right. But there are others who are like, I'm cool, let's go. I'll protect myself and go. So drive by appraisals are obviously less accurate than a walkthrough appraisal. I just don't want people thinking that this is some brand new thing that just showed up because the virus showed up. We have had drive by appraisals for a very long time.

So is it free to get a loan? Fed rates dropped to zero.

Yeah. So this is my personal Don Quixote esque mission to educate the masses. When the Fed drops rates, then the market reacts and based off of the market reaction, then mortgage rates will move. They are correlative but not causal, meaning the Fed rate dropped to zero and rates actually are in an upward trending environment because of the liquidity issues and some other stuff that I just talked about. So it is not free to get a loan. Your interest rate will not be zero. In fact, your interest rate today is higher than it would have been on the day when the Fed dropped the rate to zero. All the Fed rate means it's what they charge to lend money to other banks when they need money to lend money to us. And for that, Wells Fargo will pick the bank of your choice, pays the Fed to borrow that money. Right now those banks don't have to pay the Fed to borrow money to make a loan. And the Fed is doing that so that in hopes that it'll make it easier for all of us to borrow money. But because of the loan forgiveness stuff, that or not forgiveness, the loan deferral stuff, that has created a liquidity issue. And banks don't want to lend because they're worried about their credit lines and the liquidity issues. So it's actually putting upward Pressure on price. So it is not causal. When the Fed moves rates, it is not free to get a loan today. It's actually a little more expensive or, or more expensive, maybe not even a little than it, than it was a week, 10 days or two weeks ago. So what do you do? The real answer is you've got to seek wise counsel. I know you've heard us say that multiple times, but this is the time to over communicate with your mortgage professional. If you're in escrow, it's time to over communicate with your real estate agent, your mortgage professional, your title and escrow or closing attorney. This is the time for you to really, really ask questions. If you're curious about values on your home, now is the time to talk to your favorite local real estate agent. If you're curious about a refinance or refinancing or what that's going to mean today, it's time to talk to your favorite local mortgage professional. You've got to seek because it's so hyperlocal and it's so different. It's never been more different in markets. There's never been a less clear national answer to what's going on in my career, my 21 year career of leadership in residential real estate, it's never been more hyper local than it is today. James, what's your advice for, for what people should do?

Yeah, I mean, I think I agree with you. This is such a moving target. All of this stuff is changing by the hour that I think you really need to find the professionals that understand what's going on locally. Your real estate agent, your CPA in some cases, maybe even your attorney. But they're gonna tell you whether it's a good time to go and whether it's not. I mean, I'll give you an example we have. Brad Gill just sent me a, a comment that I thought was interesting. He says, we just helped a buyer in Santa Clara get into contract that had for the last two months ridden eight offers and missed out on so many homes. And she is so happy and so is the seller all around. This is a great opportunity for some buyers. Point is, it's so specific to your market. So you've got to find your network of people who know more about this than you do, lean on them hard and heavy and get their advice. And they're going to advise you whether, look, now's a great time, keep going. Or they might tell you that, wait two months, I don't know. It's going to be specific to each individual city based upon what it is. The other thing to keep in mind is the other comment I'll make is while some of these cities are going through, you know, Covid, on a very aggressive basis right now, others are not. That will shift. Some cities that are dealing with it hard will move out of it, and then some cities that don't have it might get it. So you. The timing part is really a moving target. And again, that's why these, these local professionals talking to your realtor, your cpa, et cetera, can help you with a lot of this.

So couldn't agree more. All right, James, thank you for your time. I know you've got a lot that you are leading through, and I want to appreciate all the attendees for your time. We are really committed to keeping communication high, to continuing to get content out for the human beings that buy and sell houses for anyone in the industry. And then, of course, we've got a lot of our people here that are on this webinar as well, and of course, for you guys. So please, everyone out there, stay safe, whatever that means for your given area, know that we're here for you as a resource. And if there's other things you'd like to see us cover, communicate, talk about, explore for you, let us know. We love you a lot. Everyone be safe. Talk to you later, guys.

Bye.

Thanks again, James.

We'll see you.