- Stocks are on track for their worst week since the financial crisis.
- Goldman Sachs is warning of no earnings growth in 2020.
- Interest and mortgage rates are headed down (again) to all time lows.
- All resulting from the worldwide spread of Coronavirus.
Why is this good news for multifamily investing? Read on to find out.
I’m not as concerned about the actual HEALTH issues with the coronavirus. As of today, The number of deaths from the virus has reached 3,110 globally, but 56,000 people die of the flu each year.
But I’m more concerned about the economic impact and a potential panic it could create in the market.
Last week, Barron's reported a warning from Goldman Sachs that U.S. public companies will post no earnings growth this year due to the inevitable spread of the Coronavirus.
Goldman’s Chief US Equity Strategist, David Kostin, sent a note to clients last Thursday, February 27, 2020.
In that note, he wrote:
“US companies will generate no earnings growth in 2020. We have updated our earnings model to incorporate the likelihood that the virus becomes widespread.”
One has to wonder – why is it that Goldman is predicting no earnings for 2020, when we are still so early in the year?
According to Kostin, supply-chain disruptions and decreased consumption would continue to hit earnings before most of the lost activity is made up later in the year. In that scenario, history suggests S&P 500 earnings per share could slide by a whopping 13%, roughly over four quarters, before rebounding 10% in 2021.
As a result, Goldman is advising its clients to shift their holdings away from cyclical stocks with significant operations abroad and into – get this – real estate.
Shortly after, Goldman increased its recommended exposure to real estate to Overweight from Neutral.
That’s just one story that grabbed our attention.
There’s been a host of news outlets reporting the impact of Coronavirus on the markets and economy.
Take a look at these recent headlines:
- Dow Falls 1,191 points…The Most in History – CNN
- Financial Markets Plummet as Coronvavirus Tightens its Grip – NPR
- Coronavirus Fears Are Driving Interest Rates Down – New York Times
- Mortgage Rates Head Back Down on Coronavirus Fears – Washington Post, Real Estate
In the last article referenced above, the Washington Post reports:
“…the Centers for Disease Control and Prevention warned that the spread of the virus is “inevitable” within the United States. The news caused the yield on the 10-year Treasury to plummet to a record low Wednesday, falling to 1.3%. It was the second day in a row the yield sank to a new low.”
My market forecast: volatility: get ready for a wild ride. The market does NOT like uncertainty, and that’s exactly what we have ahead of us. That’s because of the uncertainty around the coronavirus and the elections later in the year.
The Post goes on to explain: “Mortgage rates are influenced by several factors, but the movement of the 10-year Treasury tends to be one of the best indicators of where they are headed.”
Bottom line – when yields decrease, rates also tend to decrease.
That’s great for buying MF.
These headlines shouldn’t scare you. In fact, as a multifamily investor, they should give you a sense of peace.
Whether you are an active syndicator or a passive investor, now is a GREAT time to up your game in this alternative investment vehicle:
- They're a “safe haven” to economic uncertainty (as evidenced by the Goldman recommendation and how real estate performed in the last recession).
- Interest rates are at historic lows and may continue to go lower. This means that the cost of debt for a multifamily syndication is at an all-time low.
- Demand for affordable housing continues to increase, which means there is no shortage of tenants looking to occupy multifamily units.
The volatility of Wall Street is nothing new. I’ve created a special report that compares investing in the stock market to investing in multifamily real estate.
Now is a great time to grab that report here: www.themichaelblank.com/report
If you’re ready to start investing in multifamily real estate, or want to up your investment and are interested in the deals we have brewing at NightHawk Equity, let’s connect. Head to our website and hit the “Join” button to schedule a phone call with our deal desk.