Finally, a nice enough morning that I get sit on the balcony, drink my coffee and get caught up with the craziness the media is supplying. I sip my coffee, wow it tastes good today, and relax with my iPhone 5. Yes, it still works. I start to dig into some of the more popular news sites and watch some videos produced by some local investors I respect. Finally, not all bad news. Just what I needed to add to another relaxing morning in quarantine.
One of the videos I watched from someone I normally agree with made me pause. Am I looking at this entire thing correctly, and with my eyes wide open?


which way

His story is similar to mine in that he was invested in real estate when the last downturn hit. It was 2009 when he finally gave up, implementing a short sale on an investment property that ruined his credit and kept him out of the best buying opportunity in our lifetime. What I still believe will never be matched as long as I live. He is calloused by this experience and uses this experience when he titles his video, “Real Estate is Doomed.” His point with his catchy title, other than getting your attention, is that he believes we are going to enter into a real estate recession, similar to what we hit in 2008. It should create massive opportunities and he wants to be ready.

It is not often, but I disagree with him with this overzealous prediction, and here is why. Let me start with some of the legitimate bad news in the media, so you know I am aware of the situation and that I am not trying to be overly optimistic. Job loss numbers have never been this bad… EVER! The week ending 3/21/2020 broke a jobless claim record with 3.307 million. That record held for just one week. The very next week jobless claims were 6.648 million and that could still get adjusted up. We expect that these numbers will remain high through April, as there is a backlog and many applicants have not been able to get phone calls or emails returned. Jobs are the driving force of the economy, and these are devastating numbers. So why am I more optimistic than my pal? There are two reasons: improving COVID numbers and government support.
COVID Numbers: As I sit here looking for the latest data, I have seen multiple articles about Europe and the improvements over there. Italy is no longer the leader in positive test results, with Spain passing them by; but both countries are reporting fewer and fewer cases. In fact, with very little exception, all of Europe is reporting improvements. The primary countries still reporting increasing cases did not implement any mandatory lock downs. Looking closer to home, New York and New Jersey ranked number one and two for most cases in the US (which leads the world in cases) and they both have reported declining new cases.


I can regurgitate the statistics from the articles I have read, but I am not sure that is what is important. What is important is the primary hotspots for this virus are all reporting improvement. I also wonder what will happen as more testing becomes available. My guess is more tests will result in more positive cases, which sounds bad, but if you think about it, it will also account for more recoveries and a smaller death rate. Some experts say that actual infections could be 50X what is being reported. Yikes! Some doctors claim this virus was in the US in December, meaning if you felt a little off in December, it is possible you were infected and recovered. Maybe it is too early to tell, but this positive news is not something we were reading just one week ago. It is realistic that we can see businesses start opening up again in the next few months, making this an extreme, but short disaster. The question then becomes, how quickly can we recover once we are back up and running?

Job Support: The amount of time for a recovery is directly related to the amount of damage done. The longer people are without income means the more payments they will miss, the more evictions, foreclosures and repossessions we will see. This is exactly what some are expecting based on what we experienced 12 years ago. Our leaders understand this and understand it was their decision to halt the economy. For these reasons we are seeing their support in a big way to lessen the damage done.


We have never seen the government step in like they are right now. It can be argued that they have gone overboard already with more stimulus expected to come. Between the CARE ACT, buying mortgage securities, extending tax deadlines, and much more, they did more in 18 days than they did in 18 months of the credit crash. Here are some highlights of  the CARE ACT that will help lessen the damage done.


  • EIDL is a business relief loan program that includes $10,000 in grant money. Small businesses can apply for this loan directly by checking on the SBA website. This will help small business with operating expenses, including rent to their landlords, to keep their doors open. It is a low interest rate loan.
  • PPP is a loan to protect payroll. A business owner can borrower 2.5 times their monthly payroll and get this… they don’t need to pay it back!! I have been learning a lot about this program and can tell you that there are still a ton of questions around it. You need to apply for this loan directly with your bank.
  • Unemployment benefits are being expanded to self employed borrowers affected by the virus.
  • Increased unemployment benefits of $600 per week.
  • The stimulus check we have all heard about.
  • Deferral of taxes for properties, income, and payroll. This should loosen cash for business owners to give them time to get back to business.

This is just part of the CARE ACT and does not include corporate bailouts or the Fannie Mae and Freddie Mac programs to help home and apartment owners with payment deferrals. This also does not include what credit card companies and other creditors are doing, as well as mom and pop landlords that can afford to defer payments. Did I mentioned other programs that companies are offering? For example, there are multiple business to business programs like what Facebook and Google will be doing with free ads for impacted companies.

The bottom line is it is not fair to compare this pandemic with the credit crash. The credit crash was caused by greed. There were major mistakes made and unjustifiable risks taken. Billions of dollars in bad debt and real estate with borrowers that lied on applications and never should have received a loan. It caught me by surprise, but looking back, there was no way to avoid it. The borrowers were never able to pay their bills, so the only option was foreclosure. This time is very different. We are hurting economically because the government closed the economy down. You have smart business owners that made sound financial decisions that will suffer along with their staff simply because the government said you cannot stay open. They were able to pay their bills before the pandemic and many will be able to after. And let’s not forget we have record breaking low interest rates and tight inventory.


My guess is that as soon as businesses can reopen, people will go back to spending and these same businesses will rehire staff. I understand it will not happen overnight, but this is very different than 2008, which attacked real estate directly and lasted for 18 months to two years. It is entirely possible that this is short lived with the start of recovery a month or two away. Economist would call this a V curve, because it hits bottom and recovers quickly. 2008 is a great example of a U curve. Fall hard, stay down for a while, then recover. I may be right, and I may be wrong, but I thought it was important to bring a positive, and realistic, prospective. If I am wrong, I and Pine Financial are prepared to take advantage of it, but for the sake of so many, I hope I am right.    
I wanted to conclude by saying although I wanted to focus this article on the economy and my personal opinion, it is not lost on me that many people are suffering, both physically and financially with this pandemic.


heart knot

For personal reasons, I want to be ready and I feel prepared for whatever happens, but I wish whole heartedly that this chaos was not occurring. My heart goes out to everyone that has been negatively impacted by COVID-19.