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Black Monday: COVID-19’s Economic Strike

Stocks fell significantly on Monday, earning it the name "Black Monday" as the Dow plunged 1,800 points and the S&P decline by 7%, spurred by the spread of coronavirus as well as Saudia Arabia launching an oil price war with Russia.

The oil war was dwarfed by the coronavirus (COVID-19), as stocks fall and the Federal Reserve cuts rates a week prior.

"This will be remembered as Black Monday," said analyst Neil Wilson at trading site Markets.com on Yahoo News.

Housing is likely to be impacted as well, as supply chains are interrupted by economic volatility, but the impact on housing may not all be negative.

Motley Fool notes that China, the epicenter of the outbreak and a major foreign housing investor, is likely to invest more in U.S. housing as the outbreak continues, signalling a boost for U.S. housing. China's foreign investment in American real estate saw a decline, which many economists attribute to the lower inventory in the U.S., the U.S.-China trade war, and the strengthening dollar, but in the past month, Roofstock has seen a 450% increase in traffic from Asian countries.

According to Eddie Shapiro, founder, President, and CEO, Nest Seeker International, one thing that the coronavirus could lead to is more investment from Chinese buyers in the American real estate market. Shapiro said Chinese investors have a lot of relationships within communities that draw investments near various “Chinatowns” in core cities.

“There is a bit of a herd mentality that is mostly based on referrals and confidence within the community, so you have concentrations in New York, Los Angeles, and San Francisco, but also markets like Vancouver, British Columbia,” he said.

The possible growth of Chinese investors into a housing market that is already starving for inventory may not all be ideal. The National Association of Realtors recently reported that total housing inventory, while up 2.2% in January 2020 from December 2019 to 1.42 million units, is the lowest inventory level recorded since 1999.

Investors can take advantage of lowered interest rates, but only time will tell how the coronavirus will impact the real estate market. According to Motley Fool, there is no doubt the coronavirus will impact the American economy and real estate market in some form, but no one truly knows to what extent.

“Many real estate markets in the United States have rebounded and recovered from the 2008 recession, but there is a large chance that the continued spread of the coronavirus could be the tipping point, putting the U.S. economy into a full-blown recession,” Motley Fool adds.

On ABC News, Department of Housing and Urban Development Secretary and White House coronavirus-task-force member Dr. Ben Carson urged people to remain calm, but be smart.

“It’s very important for people to remember that this virus is like other viruses. It should be treated the same way,” Carson told ABC News. “We have flu seasons that come up frequently, and there are certain precautions you take during that time.”

For now, the market will remain relatively unchanged, but mortgage rates have still been impacted. A report by Markets Insider revealed the growing virus has caused mortgage rates to continue their downward slide. The report found the average rate for a 30-year fixed-rate mortgage hit 3.34% on Monday.

Trade groups are responding by canceling events, on Friday, Five Star Global, the parent company of the Five Star Institute and the Alliance of Merger & Acquisition Advisors, announced the cancellation of its Spring conference schedule, including the Single-Family Rental Summit, the Government Forum, and the National Mortgage Servicing Association Spring meeting.

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.
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