As published in Sisters Nugget News - June 2020
Dear Property Guy
Author: Mike Zoormajian
We once again interrupt our regularly scheduled column to take some time to assess what’s going on in the real estate world.
Last time we looked at how the COVID shutdown is affecting members of our community as both renters and property owners. Since then we’ve added civil unrest to the mix as well. So let’s address the questions blowing up my inbox: “What’s going on?” and “When will this be over?”.
To those questions, your humble servant has no answers. I can only share how some metatrends are driving real estate. Let’s look:
1.Supply and Demand
Residential values are holding. Commercial values not so much, with retail and food service getting hammered. Listings are way down across the local area, across the state, and across the country. Coincidentally, people exactly haven’t been lining up to buy either. So values are holding steady as we presently have market equilibrium. As we head to Summer, residential activity is picking up, and prices are holding with few bargains to be had.
2. Geographic Shifts
Call it the “Suburbanization of America”. We’re seeing a shift away from big cities and towards suburbs. On the West Coast, this means a shift from places like: San Francisco, L.A. and Seattle (not coincidentally COVID and protest hot spots), to places like: Bend, Boise, and Kirkland. Retail establishments that were burned or looted will have a tough business case for rebuilding. Expect excess commercial space and diminishing residential prices in cities.
3. Work From Home
This genie is out of the bottle and it is NOT going back in. People like working from home, and recent studies are showing improved productivity. Companies like Twitter and Square have already made work form home a permanent feature, expect others to follow suite.
This feeds the shift from cities, and allows people to live where they want, instead of where they work.
4. Retiree Geographic Shifts
COVID is hastening the exit of many seniors from both cities and high tax states. In addition to health and crime concerns, many retirees are experiencing economic fear as their stock investments have been shaken. This is another trend that is supporting residential prices in Central Oregon.
5. Rents, Renters and Investors
This shutdown has tossed tens of thousands of people across the economic spectrum out of work. On top of this, many businesses and jobs destroyed in riots aren’t coming back. And renters (who trend toward the lower end of the income scale) are taking the brunt of it. Expect high unemployment to continue in the foreseeable future.
Most landlords realize that mass evictions for non-payment are self-defeating. And most tenants realize that not paying rent and destroying their credit and rental history is equally self-defeating. Most have reached some sort of “pay what you can” scenario and are dealing with it. My advice to clients and tenants remains consistent: “Be kind, be patient, and be realistic.”
In short, we have a very dynamic situation that is impossible to predict. That said, we have some strong trends that should support the Central Oregon market in both the short and long-term. But to answer the question of: “When will this be over?” Nobody knows, only: “This too shall pass.”.
Mike Zoormajian is principal at WetDog Properties in Sisters. Providing local property management and investor services. Questions, comments to: firstname.lastname@example.org. Free legal advice is worth what you pay for it. Consult a real attorney before doing anything crazy.
*Copyright WetDog Properties 2020