Here are some financial moves to make during the coronavirus outbreak. As we come out of the pandemic thanks to vaccines, there are still some financial moves in the stock market, housing market, and our overall net worth portfolio to conduct.
What Is A Coronavirus?
Coronaviruses are a group of viruses that cause diseases in mammals and birds. In humans, the virus causes respiratory infections which are typically mild including the common cold but rarer forms like SARS and MERS can be lethal. As of 2020, there are no vaccines or antiviral drugs that are approved for prevention or treatment.
Worldwide, in February 1, 2020, there were over 10,000 cases of infection and 200 deaths. Fast forward to May 2, 2021, tends of millions have been infected, over 550,000 have died from the coronavirus in America, and India is currently getting crushed with over 400,000 cases a day. Thank god for the vaccines. Our lives were really upended in 2020.
It is believed that the latest version of the coronavirus came from China. As a result, many countries are deciding whether to close their borders from Chinese visitors while a vaccine is developed.
Although the global stock markets have been jittery, there is one silver lining. The bond market has rallied globally and in the U.S. As a result, mortgage interest rates have dropped.
Financial Moves To Make During The Coronavirus Outbreak
The #1 financial move every homeowner should make is to check the latest mortgage rates and refinance. You can easily check online with a lending marketplace like Credible, for free. They have pre-screened lenders looking to compete for your business.
But the chart above only captures the big picture of 30-year fixed rate mortgages, 15-year fixed rate mortgages, and 5/1 Adjustable Rate Mortgages. What happened to mortgage rates since the coronavirus outbreak?
Mortgage Rates During The Coronavirus Outbreak
After January 17, 2020, the 10-year bond yield, which is the best proxy for the direction of mortgage rates collapsed. The 10-year bond yield went from 1.86% all the way down to 1.54% once global markets realized the coronavirus was spreading. This 0.32% move in such a short time is huge and homeowners should take advantage.
With the coronavirus spreading, the #1 one thing every homeowner should do is refinance their mortgage. For those who don't own homes and have been thinking about buying a home, now is probably a good time to buy due to rising affordability.
Time To Buy Real Estate
One of the best financial moves to make is to buy real estate during the coronavirus outbreak. Real estate tends to outperform stocks during difficult times.
The median home price in America has ben coming down since early 2018, as a result, we've seen two years of home price softening. At the same time, the S&P 500 has surged ahead (+31% in 2019) and mortgage rates have fallen. Therefore, it is my belief there will be an asset class rotation into real estate in 2021 and beyond.
Real estate prices usually only decline by 2-3 years at most. Take a look at the latest decline in real estate prices between 2007 – 2009. After two years, real estate prices slowly crept up for 3 years, and then exploded higher starting in 2012.
If you're considering buying a primary residence and plan to live in it for more than five years, I would buy. Just make sure you run the numbers. The housing market is going to stay strong for years to come. Although, I acknowledge it is worth worrying about the housing market if you are trying to compete in a crazy bidding war.
More Strategic Way To Invest In Real Estate
If you want to invest in more real estate, consider real estate crowdfunding and REITs as the easiest way to invest in real estate. I do both for diversification.Real estate crowdfunding is interesting because the sponsors and real estate deals are vetted and the potential income and returns are passive.
Further, I also want to diversify away from the SF Bay Area and into the heartland of America. Valuations there are cheaper, net rental yields are higher, and growth could be faster given the demographic shifts we are seeing. Thanks to technology, more employees can now make competitive coastal city salaries while living in less expensive cities.
The best two real estate platforms are:
1) Fundrise: Washington D.C.-based Fundrise was founded in 2012 and is the most innovative real estate crowdfunding platforms for non-accredited investors. They are pioneers of the eREIT and have launched an Opportunity Fund to take advantage of new tax rules. For most people, investing in eREITs is the best way to gain real estate exposure.
2) CrowdStreet: Portland-based CrowdStreet was founded in 2014 and focus their deals in 18-hour cities, secondary cities which are cheaper and may have higher growth potential. CrowdStreet is mainly for accredited investors who are looking for ways to tap the mid-market, heartland of America real estate opportunities. You can build your own select real estate fund with individual names. through CrowdStreet.
Both platforms are free to sign up and explore. I'ver personally invested $810,000 in real estate crowdfunding to take advantage of the demographic trend of moving inland.
Don't Let The Coronavirus Beat You
Although scary, the chances of you getting the coronavirus is slim. Wash your hands frequently, don't touch your eyes and mouth with your fingers, wear a face mask if you have to, and stay away from overly crowded places with people coughing and sneezing.
Finally, if you are wondering about how stock markets perform during a healthcare pandemic, see the chart below.
The average decline from start of global interest to peak is -4.7%. But one month and 3 months later, the average respective stock market performance is up 12.3% and 23.1%, respectively.
Therefore, history also recommends buying stocks on the dip as well. Why not buy stocks and real estate if you can?
Wash your hands all the time and wear a medical mask. Stay healthy my friends! The best financial moves to make during a coronavirus outbreak are to refinance your mortgage and buy real estate. As for stocks, I'd be more cautious here. Stocks are already up massively since the March 2020 bottom. Stocks also discount the future by 6-12 months.
Related: The Pandemic Was An Experience In Hedging Your Life
Buying real estate is the safer bet in my opinion. You can sign up for my free newsletter here.