Real Estate Is Picking Up
Through the COVID-19 pandemic, one topic that has continued to loom on investor’s minds is a potential real estate rental crisis. Many have speculated that tenants have not been able to pay their rent over the course of the pandemic, which would have a great effect on the real estate market in the coming future. However, this may not actually be the case, as according to a survey conducted by the National Multifamily Housing Council, 80.4% of tenants out of 11.6 Million units, made a full or partial payment by March 2021. That figure is only about 4% off from pre-pandemic levels in 2019-2020 and up 5% from the 75.4% figure back in December 2020. Another interesting study, by RENTCafe, reports that out of 10,000 respondents, only 5% or 500 individuals needed to move because they could no longer afford rent, which is significantly down from the 16% high previously recorded at the peak of the pandemic. Analysts have attributed much of a tenant’s ability to afford rent to rental assistance programs, rent forbearance, and government stimulus. Additionally, tenants may not feel the need to move as eviction moratoriums have continued to be extended by state and federal governments. With these factors in mind, one may wonder if tenants will be able to pay their rent once these programs eventually come to an end.
This question contains multiple perspectives.. With unemployment still sitting around 6.2% and over 12 million tenants that owe an average $5,000 in rent, it is worrying that many families from these groups have become reliant on the aforementioned programs to make rent on a monthly basis. Conversely, with the US now averaging approximately 2 million doses a day and the vaccinated population continuing to increase, new job opportunities are on the rise as states continue to reopen, allowing for more families to be able to pay rent from their previous or new employer. We can also see an inverse relationship between rising cases and decreased rental payments. As cases and closures increased leading into the holiday surge, rental payments decreased. Whereas in February we returned to our original levels as vaccine distribution increased and closures began to ease. Many investors have taken a positive stance on this issue, with JLL reporting a 3% growth in residential real estate investment in comparison with other asset types since the start of the pandemic. As the country eases back its restrictions along with its increasing vaccine distribution, unemployment should trend downward allowing the multifamily sector to re establish itself back to pre pandemic levels.
Sources: Bisnow News, National Multifamily Housing Council and JLL Research
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