How has COVID affected your business?
This is different from the housing crisis in 2008. This is affecting the mortgage and real estate in general because everything has stopped. What I saw happen over 6-8 months last time, occurred over 2-3 weeks this time, where everything just shut off.
A lot of products people were using to invest in real estate completely dried up immediately, especially for investors. Last time we went through an aggressive subprime market that was aggressive loans for people buying homes for themselves.
What we’ve had over the past three years is really aggressive financing for people who want to invest in real estate for the first time. So when everything stopped, that went first, and almost immediately within 3 days, nobody wanted to fund loans anymore. We lost hundreds of deals in a few days on the investor stuff. The regular everyday person who’s trying to buy a home for themselves first time home buyer hasn’t changed.
As an investor within the last two weeks, you’ve basically been able to buy a home without having to show income as long as you can show that that the property will be ready to self-sustain itself. You were able to file those properties with LLCs, but now that whole game is going to change. I think that ramifications to the market from that over the next few months and a couple of years will be substantial.
What are your post-pandemic predictions?
It’s kind of the great unknown right now because nobody knows what’s going to happen.
If nobody is paying or there is a significant drop in payoffs, it becomes an issue if servicers fail, which is possible, and it will have a ripple effect, but I don’t think they’re going to let that happen, but that’s where we are right now. This uncertainty is because people aren’t going to make their mortgage payments.
How will the real estate industry be disrupted?
I think we’ll see a little reduction in prices because a lot of the newer real estate investors aren’t going to be able to stay in this for too long.
The difference between now and 2008 is that the country was overbuilt. There were too many houses for the people that needed to have a house so when the financing stopped we really had an oversupply and under demand. Now we won’t have the under demand we have a shortage of new houses being built so I think that because of that reason you won’t see a huge correction but will definitely see something.
I think people who look for value will look back and think this is the time to buy. Interest rates will stay very low. The government is making sure that it is going to happen. They are purchasing the treasuries, and they’re buying the bonds. I think rates will stay low for the foreseeable future at least until the election, and that will usually change things up a little bit, which will help reel people in. I think there was a significant pent up demand before the tackle because there was a lack of inventory and a lot of people looking, but if they see a stable market, they will still have a need for a home. They are always going to want to own real estate. When you look at real estate long term, it still outperforms the stock market 2:1 since 1980. So I think it’s always an excellent long term investment, and what will happen is you will start to see less short term investors and more of the long term investors, and I think it will be okay.
What has been the biggest change for you?
Since I’m still considered an essential business, I have an office close to my house so I’ve been able to get out and go back and forth since I’m the only person there, but usually, my life consists of me being in the car or meetings because I have 28 different offices in multiple states. So my focus has been getting up and exercising at home, go to the office, and coming home and working. I get a lot of work done; but besides the stress of this craziness, its been a refresher, because I’m not so run down from running all over the place. I really made a lot of progress with myself over the past couple of weeks because I have had more time to do it.
Dibugnara is currently running a mentoring program for inner-city young adults who want to get into the real estate industry called “The Generation Disruptor Scholarship Program,” which was created to help build new leaders in our communities. If you are interested in learning more, you can follow Ralph on Instagram @dibug