It isn't just houses. It's commercial real estate.

In NYC at least, almost all restaurants, bars, and retail stores absolutely depend on very high volume.

That volume is simply not coming back.

The tourists are not coming back anytime soon.

And the office workers are not all coming back ever. Many will continue to work from home and many more will work only 2-3 days a week in the office rather than 5. And many of those will pack lunch or get lunch delivered rather than go out to restaurants.

And a lot of locals are going to be very reluctant to eat in crowded restaurants where tables are 3-4 feet apart and everyone is constantly bumping into each other.

I believe there are going to be a lot of vacant stores and shops in nyc once the immediate crisis is over.

And the banks themselves are overexposed due to what appears to be systematic cooking of the books on these loans. See this article published yesterday about one whistleblower’s fight to expose this:

https://www.propublica.org/article/whistleblower-wall-street...

To pull out just one of several frightening figures from that article, just one of the commercial backed securities they analyzed appeared to have over half its properties fudged to appear more profitable.

> several frightening figures

It's hard not to imagine some pretty frightening scenarios on how this might play out over the next 12-24 mos. The far-reaching unemployment this could cause (if/when lenders start calling these loans) has significant long term implications.

Maybe. The other possibility -- with people 3-4 feet apart -- is that demand will outstrip supply. You'll have far less capacity for people to eat, perhaps by much more than fewer diners.

Two things are sure: (1) Things are gonna get weirder (2) Landlords aren't going to do as well.

Landlords will probably do fine in a currency-printing world.

> That volume is simply not coming back.

I keep hearing versions of this. Such dire finality. Do you actually believe that in 1 or 2 years time bars in Times Square won't be as busy as ever? If yes I think you are radically underestimating New Yorkers.

Look at the Spanish flu after that 1919 you had the roaring 20's people did not change behaviour radically after that.

Entirely depends upon whether or not people feel safe in crowds.

More effective treatments, a vaccine, herd immunity, better testing and tracing, or some combination thereof could make people feel safe in crowds again.

But I do think there will be a large shift toward more "work from home" for office workers with fewer open office cube farms and more contained offices for individuals/small teams, so I would expect the lunch and afterwork crowds in Manhattan to thin out. It's not going to be fun going out to happy hour when you might get sick with a dangerous virus that could kill your parents if you visit them that weekend.

And 1-2 years is more than enough time for all of those bars in Times Square to go out of business. Someone will open new ones when a vaccine comes out, of course, but that could be a long time.

And if the schools do not reopen in the fall in the city but they do in the suburbs, a lot of families will leave. I might :(. Remote schooling has been a disaster.

New Yorkers don't go to times square, rich tourists do.

> depend on high volume

And they’re taxed accordingly. Governments are going to be facing huge revenue shortfalls, too, and they’re going to be coming after already squeezed taxpayers to make up for it.

>And a lot of locals are going to be very reluctant to eat in crowded restaurants where tables are 3-4 feet apart and everyone is constantly bumping into each other.

i don't see any issue here as long as everybody wears their rabbies ... err .. coronavirus vaccination and immunity certifying tags/armbands/bracelets. Those can even be automatically read upon entering businesses, offices, subway, etc.

The crisis in many respects is incorrectly blamed on the virus whereis it is mostly self-inflicted by lack of coherent response and is self-prolonged and made much more severe by the failure so far to launch any real counter-pandemic measures like for example massive testing and contact tracing.

Wrt. the stocks - the government has already made it pretty clear that they are propping those pure numbers up, real economy and people be damned, at least until the elections.

> And nothing about the pandemic made the houses themselves more or less valuable

Supply and demand. If people are moving out of Manhattan (and they are), then demand went down and the house is less valuable. If people have lost their job and can't afford mortgage and sell their home and move into a rental apartment, supply for homes increased and the house is less valuable.

That's not how it works, at least not in 2009. If you don't have enough equity, the bank is not interested in letting you short-sell your house and thus won't approve it (they would rather you default on the loan!) People who have more equity in their homes will decide to sit tight so they don't have to take a loss. Even commercial real-estate will let their properties lie fallow rather than lower the rent.

"Supply and demand" is a nice platitude and economic theory but it doesn't reflect reality.

Because commercial can keep getting loans to because the property price generally goes up. If lending tightens and prices stagnate you might, and I believe will, see a lot of comm defaults soon.

Manhattan expats are going to boost demand in the commutable tristate suburbs.

>pretend that the last 3 months didn’t happen for mortgages and add the payments at the end

How are people who can't afford three morgage payments going to afford a triple payment at the end?

The traditional reading is "at the end of the mortgage" (ie, at the end of the 30 year period), not "the end of shelter-in-place". If the median age of a 30 year mortgage is 15 years, it doesn't seem unreasonable to think that borrowers will be able to pay for the payments in 15 years.

Though to be clear, there are some lenders that implementing it as "at the end of shelter-in-place", but they're in for a hard lesson.

There is also the corner case where the mortgage matures ~now, which is unfortunate, but that's not the case for most of them.

>(ie, at the end of the 30 year period)

My understanding is that the traditional reading was that the mortgages would be extended for N months, so there is no balloon payment ever; just the loan lasting a bit longer than expected.

They’re gonna pay the mortgage for three extra months, not a lump sum at the end.

That’s a sweet deferral for people: at the end of their mortgage period, their mortgage payment is worth a lot less than it is today.

It's not like this for all mortgages. Some lenders are demanding a lump sum of the 3 payments after the 90 days.

Oh, so then it's nicer than what they're doing with rent.