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COVID-19 Effect and Outlook on the Cash, Creative and Traditional Real Estate Market

covid-19 effect real estate market kansas city


Live from the KC Property Guys and KC Pier Studio in beautiful Kansas City. Home to over 200 fountains and more barbecue restaurants per capita than anywhere in the nation. It’s the Kansas City Real Estate Industry Leader Show, a show about industry leaders from the local Kansas City metro market for Kansas City real estate related professionals and enthusiasts like you. Join us for today’s episode on the effect of covid-19 on the real estate market. And now here’s your hosts, Eric and Lucas Scheele.

COVID-19 Effect on Real Estate Market

Lucas Scheele:
How’s it going everybody? My name is Lucas Scheele and welcome back to another Kansas City Real Estate Industry Leaders podcast. I’m here with my cohost, Eric Scheele. Today we have a little bit of a special episode for you because we’re going to be talking about how the COVID-19 pandemic its effect on the fast cash industry and real estate market in itself. So Eric, did you want to start us off?

Eric Scheele:
Sure, yeah. Welcome back, right?

Lucas Scheele:
Yeah, it’s been four or five weeks?

Eric Scheele:
Four Or five weeks, we were, Oh gosh, April, early April. We basically put a pause on our podcasting as we navigated these waters just like most and many small businesses have. In some ways being reflective, we’re somewhat lucky because we were considered construction safety specifically with KC Pier and KC Property Guys on our rehabs, and our realtors also were considered essential. And so, we have been in business, and we’ve come to business, come to the shop and the studio.

Lucas Scheele:
Has been an adjustment though, for sure.

Eric Scheele:
On a daily basis, but what we’ve been doing on a almost a day to day, week to week… more so a week to week now… but at the very beginning it was literally day by day trying to navigate all these changes in how our environment has adjusted to COVID-19. And how our clients, whether it’s through KC Pier, or KC Property Guys, or KCPG Realty Group have been affected. And how those phone calls are also going when they come in, and they’re asking these questions, and how do we handle our visits?

Eric Scheele:
Everybody’s dealing with COVID-19 in its current state, and what we’ve learned on this learning curve a little bit differently. We’re going to spend some time today talking about some of those general, not necessarily specifically about us, but at least our observations on Covid-19 and its effect on the real estate market, and maybe some takeaways that we can talk about from that perspective.

Lucas Scheele:
Especially with the listing side of it, coming to the houses. When I know we go and we purchase houses straight up, but when we have to actually list the house, it’s really hard for people to actually get into the house and see it for themselves now.

Virtual Tours

Eric Scheele:
Well, the listing side of it has changed quite a bit. So now many of these listings are being encouraged to do virtual tours. KCPG Realty Group specifically has been adjusting to those changes. You’re not having mass open houses. The open house-

Lucas Scheele:
Can’t do it anymore.

Eric Scheele:
… on a Saturday and Sunday is just, it’s temporarily on hold. You’ve been doing some marketing and work with KCPG Realty Group, where you’re actually going through these houses now and doing virtual tours.

Lucas Scheele:
Yeah, we actually did bring in some new technology. We have a small mini drone that actually shoots really, really high quality video we’re able to take inside. It’s just great because you can get these awesome cinematic shots really simply. It takes probably about an hour to do it. Then we can actually give the buyer of the house or whoever’s looking at the house a lot better idea of

Eric Scheele:
A really nice virtual tour. Right?

Lucas Scheele:
Yeah, exactly.

Eric Scheele:
We’ve adjusted our virtual tours and provided those with all of our listings. The call flow has even changed. It’s gone from-

Lucas Scheele:
That’s more something that you’ve seen for sure.

Eric Scheele:
Absolutely. It’s gone from extremely active to, “Hey, what’s going on? I think we’re going to put things on hold.” No calls really came in there for a while. Then it was up and down and kind of variable. Now we’re starting to see some ramping back up. But at the same time, it’s changed. The calls that we’re getting now on Property Guys specifically are related to must sells.

Lucas Scheele:
Yeah, because no one’s looking to move in the middle of the COVID-19 due to the effect on the real estate market.

Eric Scheele:
The shopping is slowed down dramatically.

Lucas Scheele:
Oh definitely.

Eric Scheele:
But the must sells, people that are either affected by COVID-19 personally, whether through its furloughs, or lay offs, or even job losses, those people are making some calls. To even estates and trusts, we are working a lot with estates and trusts. Not necessarily COVID-19 passings or deaths, but estates and trusts does still happen. Life still goes on, and so we are working with those types of calls. But the people that are just shopping, thinking about cash or a traditional real estate market, that definitely has changed. And how you approach the houses when you look at them has changed, right?

Lucas Scheele:
Yes.

Safety Precautions

Eric Scheele:
We’re wearing gloves, We’re wearing masks. We’re courteous of the homeowners that are in there.

Lucas Scheele:
Absolutely.

Eric Scheele:
Though everybody’s different, and they’re thinking of that as well. We come prepared with our gloves and our masks, but homeowners sometimes don’t, and it’s their personal choice, but we’re coming in protected, right?

Lucas Scheele:
Definitely, yeah.

Eric Scheele:
Even with KC Pier, that’s essential work. And that that work, it’s spring time, so they’re backed up. But those guys are now wearing-

Lucas Scheele:
They’re gloved up and they’re masked up.

Eric Scheele:
Cleaning their equipment and not sharing the equipment. Sealing off that last point of exit, so we’re working in semi-closed environments at times. Those types of adjustments have had to be had as well.

Lucas Scheele:
Small adjustments.

Eric Scheele:
Right?

Lucas Scheele:
Yeah.

Eric Scheele:
So today’s environment, COVID-19, and the real question to a lot of business owners, even though we’re going to open up here at May 11th, a week from now, is what’s to come? What’s going to happen on the housing side when we meet with the Realty Group, and even from me personally the effect on the creative real estate side with KC Property Guys, is how is COVID-19 and these job furloughs, and layoffs, and changes going to affect, long term effects, of what are the specifically the distressed and foreclosure markets going looking to look like? What’s this going to be like? And once these banks begin to catch up with some of these people that have not been making mortgage payments-

Lucas Scheele:
Especially through the pandemic.

Eric Scheele:
… because of COVID-19. They’re basically putting on hold, but at the end of the day, they’re not going to forgive the debt. The debt is going to continue at some point. That’s going to have to be picked back up and paid. For those that can’t catch up, if they can’t reinstate, ultimately there’s potential of foreclosure rush. And that’s some of the rumors on articles that you read is what does the fourth quarter of 2020 look like? How does that affect the housing demand?

The Effect on Homeowenrs

Lucas Scheele:
How does that affect homeowners?

Eric Scheele:
Homeowners housing demand and buyers? Right now the interest rates are fantastic. There’s actually very low inventory on the market, but there’s a plethora of buyers that are ready, that have gone through the refinancing, or have been approved through the loans that prior to COVID, but yet they can’t find the house that they want because the inventory is low. People simply aren’t selling. We’re going to be navigating COVID-19 and its effect on the real estate market… I guess that’s my point is we’re going to be navigating COVID-19, even though we open up on the 11th, we’re going to be navigating this for potentially through 2020.

Speaker 1:
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Lucas Scheele:
No, you’re absolutely right about that. And just me talking to my friends at home and coworkers, like we’re going to be very, very cautious even going out after this is opened up and the state’s opened up.

Eric Scheele:
I think all marks are going to be conservative.

Lucas Scheele:
Oh, absolutely.

Conservative Market

Eric Scheele:
They have to be depressed at some level because certain people are judging and navigating COVID differently, and regardless of the industry. And so I think, for the most part, you’re going to see a relatively conservative and depressed market. Even though you hear a lot of talk about revamping the economy and getting it back to where it was just a month and a half ago. But I think that’s still going to be a slow climb.

Lucas Scheele:
Oh absolutely.

Eric Scheele:
Just because perceptions have changed now and the environment has changed. People are navigating COVID differently. You still see when you go out on the street, some people aren’t wearing gloves, aren’t wearing masks, and they’re saying, “Hey, I’m in phase four and been in phase four since April.” Then you have others that are like, “The sky’s fallen and-

Lucas Scheele:
Generally cautious, cautious people.

Eric Scheele:
Extremely cautious, right?

Lucas Scheele:
Yes.

Eric Scheele:
And so that mentality, it’s going to maintain, it’s going to stick around, and it’s going to affect all businesses, whether it’s related to real estate or not. But I would expect us on the Property Guys’ side to still see a lot of conservatism. From an investor’s perspective, this is my opinion only, during dramatic dynamic changes, times of change, me as an investor, I tend to be become conservative. I start to hold on to those assets, and I become less of a risk taker, which we’ve done for the last four weeks. We basically have been shuffling through our inventory. There for four weeks, we didn’t make a purchase.

Lucas Scheele:
No, we didn’t.

Eric Scheele:
Phone calls were coming. What we typically do is talk to people and consult them about potentially listing and getting KCPG Realty Group. We do that with every house showing that I go to. If you call me for a cash buy, I’m going to look at it from multiple perspectives. I’m going to look at it from a cash buy perspective. I tell everybody this. I’m going to look at it from a realtor’s perspective. However, I’m not a realtor. We happen to have five extremely talented-

Lucas Scheele:
A great team of realtors.

Eric Scheele:
…realtors on KCPG Realty Group that are power realtors, that literally between all of us do 140 to 150 houses.

Lucas Scheele:
We closed what? Three or four houses, just this week?

Creative Solutions for Homeowners

Eric Scheele:
…houses a year, right, so it works out to be dozens and dozens of houses within the quarters from each of those realtors. I look at it from a realtor’s perspective, and then we also look at it from the creative side. We look at potentially involving our crews and doing lots of different creative solutions for homeowners depending on the solution. Depending on the situation and bringing the solution.

Eric Scheele:
So I think we’re going to see, at least from my perspective as an investor, we’ll become a bit more conservative because of the covid-19 effect on the real estate market. We’re going to probably consult more towards listings, more towards maybe some creative sides that don’t necessarily outlie as much cash up front from an investor’s perspective, and start to mitigate and share some of those risks that I would normally take on myself with a cash purchase.

Eric Scheele:
That’s what I foresee in the future based on what we’ve experienced for the last month and a half as an investor. You just use the earmarks of people. You read people, you read situations. The economy though is good, the rates are fantastic, but you just simply don’t know the conservatism of people. That’s what if you could predict it well, everybody would be a stock market home investor-

Lucas Scheele:
Yeah, everyone would be rich.

Eric Scheele:
…and a broker, yeah. There’s too much uncertainty out there. I think that’s what we’re going to probably gauge at least in the early months of our post COVID environment. Let’s call it June to August, where it’s going to be a much more conservative. Then we’ll look at the fourth quarter as it draws near. But from that perspective, I think we’re going to see at least us personally becoming a lot more conservative.

Lucas Scheele:
Yeah, absolutely.

Eric Scheele:
On the Pier side, from that perspective, is that’s that’s based off of homeowners. What we’ve seen on the Pier side specifically is it’s raining.

Lucas Scheele:
Yeah, it’s raining a bunch. Literally yesterday, I think it rained, what, at least 10 hours?

Eric Scheele:
Guess what happens when it rains?

Lucas Scheele:
Water in the basements.

Eric Scheele:
Water’s in the basements. You’ve been doing a lot of marketing on this, and you’ve been videoing all these interior drains and exterior waterproofings. The needs for home improvements, specifically based off of emergency recoveries, have been there because of Mother Nature.

Lucas Scheele:
And they’re here, like they’re here now.

Eric Scheele:
And people are at home. And so because people are home because of COVID, they’re seeing these issues. It’s not like hey, both the husband and the wife, they’re at work all day. The basement’s flooding, but they don’t know about it. No, they’re both home now. And so when it rains, they go down to the basement, they watch active leaks in their basement, and they’re going to do something about it because they’re both at home. So on the Pier side we’re getting an influx of calls.

Lucas Scheele:
A lot, a lot of waterproofing.

Eric Scheele:
We’re doing a lot of consulting and most of it’s waterproofing?

Lucas Scheele:
Yeah.

Eric Scheele:
We were out in Edgerton yesterday, and we were standing in two inches of water looking at a house from a Property Guys’ perspective. But we also had the Pier guys.

Lucas Scheele:
It’s just cause the clay heaved the entire slab up.

Eric Scheele:
That right?

Lucas Scheele:
Yeah.

Eric Scheele:
And so there’s lots of water out there. People are seeing it. They’re given the calls, but yet depending on their financial, if they’re working from home and actively working in there, they have a lot of consumer confidence that their job’s still going to be there. Those guys are improving their house. They’re the ones that are getting the work done. But if they’re on furlough yet, they want to consult because they got this active leak on their basement, but they’re not necessarily sure where their job’s going to be in June ,or July, or August. Those guys are probably holding off. And we’re seeing a lot of that.

Eric Scheele:
It’s really hit and miss in terms of the perspective for Pier. So Property Guys, from an investor standpoint, I think we’re going to see a lot of conservatism due to covid-19 and its effect on the real estate market. Pier, I think we’re going to just based on need, but we’re seeing trends of either things are getting fixed because all the consumer confidence is still there, or things need fixed.

Lucas Scheele:
They got to hold off.

Eric Scheele:
But yet, they got to hold conservative because I just don’t know my financial future. Then from a real estate perspective, KCPG Realty Group-

Lucas Scheele:
The rates are really low.

Eric Scheele:
The listings aren’t necessarily there right now because of covid-19 effect real estate market. So there’s this, you got these buyers that are out there that are looking for those properties, but the lack of inventory is… And the nice rates, still very economical rates with a lot of pre-approvals that have taken place prior to COVID. You get a lot of buyer interest with some seller demand when the inventory is low. But the houses aren’t necessarily there because people are being relatively conservative.

Eric Scheele:
And so like I said, at least from our perspective on Property Guys, we’ve been fortunate enough to be going through inventory and just finishing those houses. As soon as those houses have been finished… You’ve seen this?

Lucas Scheele:
Yeah, they’ve been moving properties. They’re closing,

Eric Scheele:
Yeah. It’s multiple offers, and that’s all a sign of everybody, this influx of people that are just looking for demands and inventory. And so from a real estate perspective, I expect to see rather a rather steady pace just dealing. But that pace, the motivations behind the pace I think will change. Right now it’s based off of demand, low inventory, high demand, great rates. Over time, I think the rates are going to probably stay relatively competitive. The inventory is going to start to increase, and so you’re going to see a transition. But still we’re in the summer, so we’re in the buying mode.

Lucas Scheele:
See a lot more lookers.

Eric Scheele:
There’s still going to be some interest, and that’s going to maintain a steady pace for the realtors. Then when you get to December, that’s that fourth quarter of 2020. That’s where I think it might get a little dicey and interesting because I don’t know how the banks are going to react in terms of some of this-

Lucas Scheele:
The loans they’ve given.

Eric Scheele:
…modifications and things of that nature in terms of the distressed and foreclosure markets. That has some uncertainty in my mind. I’m having a hard time drawing an opinion. I’d love to see some comments on what some people think in terms of what’s going to happen in the fourth quarter, but I’m more interested to try to get us through June. Take a look at July, and then once July hits and we start to project, and take a look and make some-

Lucas Scheele:
Then we can sit down and map out the plan.

Eric Scheele:
…discussions about fourth quarter of 2020. It’d be interesting to see how the economy’s doing. It’ll be interesting. We’re going into an election year in November.

Lucas Scheele:
Yes we are.

Eric Scheele:
We’re going to know what those interest rates are. I think we just see a lot of potentially dynamic change, which also rolls back because I can’t really see the fourth quarter. Like I know it feels sometimes-

Lucas Scheele:
Predict the future.

Eric Scheele:
But a lot of times I feel you got confidence whether you feel like what the fourth quarter is going to bring, but because it’s not there, that’s where I’m saying back on KC Property Guys, specifically on the investment side, that it needs to probably be a little bit more conservative. I would advise any investor, home investor, real estate investor, anybody that dabbles in investment and real estate to probably take the same approach.

Eric Scheele:
Guaranteed if you take the same approach, any cash that you have built up for investment is probably still going to be there in the fourth quarter. But if it doesn’t go your way then, and you are aggressive, and then the foreclosure markets hits, and things begin to shift, and you get loaded with inventory that you can’t not move, then you can’t say that same thing that you can say today that that cash is still there. That’s where conservatism plays in your favor.

Lucas Scheele:
Especially during the COVID-19.

Eric Scheele:
It’s six months. Six months is going to fly by. From an investment perspective, I like to predicate on being cautious over being aggressive in a dynamic market. So for real estate investors themselves that are looking, and there is a lot of interest, it’s still there because of these rates that are really, really high, and these hard money lenders that are out there just dying to give this money away.

Eric Scheele:
That was a big push prior to COVID is that there was a plethora of, and the economy was great. People were making a lot of money. They wanted to be able to make their money make money, and they were doing it. A lot of them were doing it through some hard money lending, and participant loan sharing, and things of that nature. That stuff has gone on hold a little bit because of the lack of available inventory. People’s being conservative. It’s going to come back, but you just don’t know the long term effects. And so that’s why I feel like conservatism should probably weigh heavy in a lot of people’s considerations for 2020.

Lucas Scheele:
Absolutely. Well, we’re definitely going to stay a little bit more conservative during this COVID-19 pandemic due to its effect on the real estate market. We’re going to be staying inside having a lot of family game nights this month. But I hope you guys enjoyed this episode of KC Property Guys. You guys stay safe, and healthy, and practice your social distancing, and we’ll see you on the next episode. You have a great day.

Eric Scheele:
Yeah, mm-hmm (affirmative).

Speaker 1:
Thanks for joining us this week on the Kansas City Real Estate Industry Leader Show to discuss the COVID-19 Effect and Outlook on the Cash, Creative, and Traditional Real Estate Market. Please support all things local to Kansas City, and hey, be sure to subscribe and share our podcast on Facebook and LinkedIn. This has been a KC Property Guys production, KCpropertyguys.com.