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Resist the Urge to Panic

By Datta Khalsa, Broker

Last week I received a form letter from one of the big Commercial brokerages over the hill who have been increasingly entering the arena for apartment listings in our county of late. It was a solicitation on one of my rental properties, targeting me as the owner of record—and clearly oblivious to the fact that they were also addressing a seasoned real estate broker and investor.

The message was blunt and alarming. The subject line read “Datta, apartment values have dropped 23% due to Coronavirus. What does it mean for Soquel…” They went on to cite an online analytics firm whose data was recently published in a Bay Area newspaper with a graph showing “Estimated Drop in Real Estate Values due to Coronavirus since 2/21/20”.

They included a graph showing multiple categories of real estate allegedly devalued as a result of the pandemic by as much as 49% (for Senior Housing). And sure enough, in between Strip Centers (at 24%) and Single Family Rentals (at 19%), right there on the graph it showed Apartment Buildings down in value by 23%.

Wow. Common sense and professional standards dictate that we rely upon actual sales statistics to establish market values, and selling prices don’t even get published until a sufficient number or escrows (which on average take 1-2 months to process) have closed. But here, less than 7 weeks after the turn date being used, they were already administering the post-mortem on 16 different categories of real estate, complete with an exact percentage for the decline in value for each one.

But not to worry, they were here to guide me through these troubled times. In a demonstration of their reputability they included an impressive portfolio of properties their office has handled. And to express their willingness to help out, they also offered me a complimentary analysis on my apartments plus an unspecified $10K credit if I transact through them this year.

I was moved to the point of writing them a pretty stern response. And to spread the word to anyone else receiving their type of message not buy in to the panic peddling. Instead, more reputable agents have been advising clients to hold off on making any kind of a snap decision until we get further data to provide a true read on our local real estate market.

More encouraging statistics are starting to come in, and the implied prognosis for income property is not nearly as grim as the doomsayers would have you believe. One notable confirmation of this is the numbers of residential tenants paying their rents during the first major cycle during the pandemic came in far higher than was initially anticipated.

In fact, the most reliable current indicators suggest that, while the SIP has certainly impacted certain properties in the short term, based on how Santa Cruz and other communities have risen to the challenge of flattening the curve and how local landlords and tenants have managed to navigate the challenges thus far, the Coronavirus is not expected have a lasting impact on the value of real estate once we make it through the toughest part of the pandemic. More in-depth details and statistics are available via online updates by me and others, and to directly discuss a particular property or situation you can reach out to any good and reputable local agent.

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