Apartment Rents Dropping Because Of Pandemic - Zumper
[Pandemic Pricing Is Here](https://www.cnn.com/2020/06/16/success/rents-are-dropping-us-cities-coronavirus/index.html)

I'm hearing about the same trend, though rent collections have held up per NMHC.  But rents are down year over year for sure, and we're getting into the weak part of the year for demand.  Nevertheless, my understanding is that rents are up marginally over the last month or so.

I figure once we get through all the projects underway right now, multi is in good shape.  Starts have sharply declined and the homeownership rate will probably decline too.  Weak household growth because of poor employment will hurt rents too, but medium term, I like the segment.  Anyone feel differently?
[{"id": "fv618p4", "text": "My Class B+ units are 100% occupied and renewals are increasing 20$ month. CNN biased article focuses on higher market segment in big cities.....", "replies": [{"id": "fv67bg5", "text": "80% of the US lives in urban areas so it makes sense that they would focus on the places where most people live.\n\nNot everything is a \u201clibrul conspiracy\u201d.\n\nhttps://www.washingtonpost.com/business/2018/12/18/americans-say-theres-not-much-appeal-big-city-living-why-do-so-many-us-live-there/", "replies": [], "depth": 2}], "depth": 1}, {"id": "fv67c3y", "text": "Cares act prohibits rent changes or non renewals in a lot of units. Not to mention eviction moratoriums. Not shocking.", "replies": [{"id": "fv693i1", "text": "Naw, you can still bang rents up nationally on renewals. Eviction moratoriums are state by state (only a handful put them in - CA, NJ, NY come to mind), otherwise you can kick people out as long as you don\u2019t have GSE debt (and even then you can evict as long as the eviction started prior to the covid moratorium). The bigger issue is that courts were closed for so long so there\u2019s a huge backlog to get in front of a judge. We just evicted like 50 people in our Texas assets this week, although judges were super lenient (which I was surprised by, especially in Harris County) and have anyone who showed up to the hearing more time. The people who skipped the hearing got evicted.", "replies": [{"id": "fv6isud", "text": "My reading of the law is that Texas is the most pro landowner state in the union. It looks like for most all other states evictions are a real headache and a half.", "replies": [{"id": "fv7cnc1", "text": "I was once rescue capital for a big industrial property in Texas that had like 40% of it leased to a fortune 50 company that used the space as their server backup / emergency shelter if the HQ ever got destroyed. Prior ownership was a clown show that had these guys on a super below market MTM lease for several years. T didn\u2019t want to sign a lease so I said fu, got a court hearing and was ready to evict them in 30 days (could have done it in 2 weeks but wanted to negotiate). It was a mission critical center so I effectively put a gun to their head and got them to sign a 10 year lease $6 above market. If they didn\u2019t accept terms I had a contractor lined up to pull all their shit out and put it on the street. That got them to move fast hahaha. Sweet execution crushed it on the sale. Thanks Texas courts!", "replies": [], "depth": 4}], "depth": 3}, {"id": "fv70ikp", "text": "Now that is interesting to hear.  I'm also surprised to hear that the judges were super lenient.  The CARES act is still forking over money until the end of July, and like you said, non-GSE loan properties don't have the lenience on forebearance, so they still need to collect and that means they need some leverage, which, for better or worse, is eviction in most cases.\n\nNow at the end of July if there's not further stimulus and employment is still off by huge margins, then you really start to sweat.", "replies": [{"id": "fv7bklq", "text": "Yea I was shocked - they gave everyone who showed up a couple of extra weeks to pay in full. One dude dialed in with a cough and the judge told him to get COVID tested before his next hearing and if he has it the guy would get more time. He\u2019s probably out around Houston now no mask on cruising to everywhere he can with a ton of people.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fv8s7m4", "text": "Actually, this IS surprising to me. I would have thought asking rents would actually go up, since there would be virtually no available units since landlords can\u2019t evict anyone- if you happen to be a person looking for a new place, there would be no supply.  (Same way rent control leads to rent spikes because no one wants to lose their rent controlled apartment.)", "replies": [{"id": "fv8xtdk", "text": "Likewise, if you have something outside of CARES, you potentially have a lot more options, depending on local moratoria. Results may be unpredictable.", "replies": [], "depth": 3}, {"id": "fvc4xni", "text": "Well I think two things drove down rents.  The first is obvious; a lot of units delivered in the first quarter, just in time for a spring lockdown.  New demand, that is household growth of roommate situations getting split up and kids leaving home got paused because of lockdowns, and the higher vacancy hit rents.\n\nThe second thing was just less foot traffic.  I think a lot of buildings weren't getting the foot traffic they were expecting and started lowering rents to juice demand that wasn't coming.  I think they ended up getting a lot more renewals than they anticipated and so that's rescued rents to some degree.  Again, my understanding is that recently rents have returned to marginally positive growth.  But I think that initial change in how units were being rented caused property managers to worry since they weren't getting the normal amounts of traffic and their historical models/experiences would say that they lose a certain number of units every spring.  But they wouldn't have known how high that renewal rate was going to be until well after they saw their traffic declining.", "replies": [{"id": "fvcl4jb", "text": "I wonder if Airbnb\u2019s converting back to regular rentals were a large enough volume to significantly increase rental supply too.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fv68ovg", "text": "ODCE is overweight to NYC and LA rents which are dropping. Suburban class b is holding strong although concessioning is up. \n\nAlso NMHC data is correct in that collections are improving (not that they were ever THAT bad) but occupancy has dropped so net net you\u2019re getting the same amount of revenue as people unable to pay have moved out", "replies": [{"id": "fv715ql", "text": "Acknowledged and agreed, though I don't think that Zumper data is sourced from NCREIF/ODCE.  You're right about that Suburban Class B, and I'm pretty positive on both Suburban and Class B right now.  Downward pressure in recessions should help Class B hold up and the suburbs seem pretty underbuilt, particularly relative to downtowns.", "replies": [{"id": "fv7c1tw", "text": "In my MF book we\u2019re seeing a huge pop in leasing for suburban product close to NYC / Boston / DC as people are moving out of the city. Why pay $3k/month for a 500sf 2br you\u2019ve been stuck in working from home when you can move 45 mins outside the city pay the same amount and get 3x the space, especially with the new work from home normal. If people think they\u2019re only going to go to the office a few times a week once things normalize there\u2019s not much premium on living close to the office, you can suck up the longish commute on the train a couple of days a week. Seeing good velocity, good rent growth on new move ins and have been aggressively pushing renewals. The only place we\u2019ve been soft on rent growth / renewal increases is in Houston with the double whammy of covid and oil price collapse but we\u2019ve been able to hold occupancy steady (evictions I mentioned in other comment not withstanding)", "replies": [{"id": "fvadiz9", "text": "How do you even fit two bedrooms into 500 ft\u00b2?", "replies": [{"id": "fvaett8", "text": "With a divider in the living room. Welcome to NYC!", "replies": [{"id": "fvalrdf", "text": "Whoa, I don't care about having a huge living space but", "replies": [{"id": "fvbx6r6", "text": "Ever been in a micro unit? I legit think prison cells are larger", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fv6f1ay", "text": "Do you guys think there will be more inventory in this space in the coming years because people will not want to deal with it anymore?", "replies": [], "depth": 1}, {"id": "fv7140v", "text": "This article talked a lot about NYC and I think your comments aren't necessarily about NYC. \n\nIn NYC I think we're going to see a lot of failed condo projects competing with traditional multis for rental income. Couple that with people's desire not to share an elevator with 400 other strangers, and I think the apartment sector is going to face some headwinds. But eventually it will all come back.", "replies": [{"id": "fv71qez", "text": "Interesting point on the elevators, honestly.  That's the kind of small-time logistical item that I lose in big picture demographic or data analysis.  \n\nMany heavily urban areas, including NYC, are facing a lot of supply.  Condo or apartment, I think any new builds face a struggle at the moment.  But yeah, the elevators, the density, people could well make an effort to avoid those things, and when you add in work from home, maybe the suburbs are calling?", "replies": [{"id": "fvanecf", "text": "They\u2019ve been calling big time. Suburbs of NYC are seeing activity not seen since 2006.", "replies": [], "depth": 3}], "depth": 2}, {"id": "fv75puf", "text": "&gt;But eventually it will all come back.\n\nNot if a lot of the negative net migration out of major metro areas is permanent.\n\nOr maybe \"eventually\" for you means 5-6 years +.  In which case, that's little reassurance for small landlords", "replies": [{"id": "fvanadz", "text": "True. I sadly don\u2019t know if I have much reassurance for small landlords.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fv8vx62", "text": "Vacancy is the primary driver to dropping rents. At this point, I would describe it as a migration more than a surge in vacancy. \n\nAn overpriced tiny apartment suddenly becomes way less sexy if you are now WFH and your lifestyle no longer involves enjoying sexy restaurants, bars, general city life.", "replies": [], "depth": 1}, {"id": "fv9d4nz", "text": "[Alternative Data on Real Estate Market](https://www.thinknum.com/resources/casestudy/real_estate_investing?utm_source=Abdus&amp;utm_medium=email&amp;utm_campaign=reit) \\-- tracking pricing changes in real-time, and I can agree, there are some noticeable changes occuring", "replies": [], "depth": 1}, {"id": "fvaet49", "text": "I'm in a second tier FL mkt that's had a crazy low apartment vacancy rate for years, like 2-3%.  This is despite lots and lots of apartment construction in the last five to six years and ongoing rent increases.   I heard about people on waiting lists for months to get an apartment.\n\nNow is I'm driving around town, I'm seeing signs posted about free rent or a gift card if you move in by x date.  Really quite a change.", "replies": [{"id": "fvc39q2", "text": "I know some smaller Florida markets are driven so much by retirees, like Port St. Lucie.  A meaningful break in that migration (and you gotta figure there will be if more cautious retirees see risk to their health in moving right now) will hurt absorption directly and indirectly.  \n\nRealPage is reporting some big rises in concessions.  It sounds like your market could be worse than some others, though.", "replies": [], "depth": 2}], "depth": 1}]