Rental Housing Market June:

It’s Looking Good (For Most)

 

Where does the rental market stand in June? It seems there’s positivity in the market overall but does that translate to the housing market? Will housing crash or will it stabilize and eventually grow? This is important to know if you’re looking to buy, sell or flip your property. Also we will address whether tenants are paying or not. Because if tenant’s aren’t paying many landlords may be thinking about evictions.

For more in depth explanations of the following, please watch the video above.

I suggest using eviction as an absolute last option and instead I am going the payment plan route for my own tenants who can’t pay their rent.

The housing market, overall, is showing that rentals have been bruised but have every ability to come back pretty quickly, but some property types may require some adjustments to maximize their returns. This includes home flipping.

You need to be especially careful now if you want to flip a property given how volatile the market is right now.

Positive Outlook

It is important to note that even amongst everything going on the average American consumer is extremely positive that things will indeed get better. And with the new data coming in that I’m sharing with you, it’s looking like there’s reason to be optimistic.

But let’s try to separate ourselves, for a moment, from the pixie dust on Wall Street and the headlines in the news so we can figure out where the rental market really stands so that we stay in front of the chaos.

On top of gathering and analyzing the new market data streaming in I’ll be sharing how our own portfolio of about 1000 rental properties under management is fairing. I’ll be breaking it down by single family and multifamily and how each subgroup with different bases of tenants are fairing.

Unemployment Levels Improve

To economists surprise, because this level wasn’t expected, unemployment is actually looking like it’s heading on down as the market re-opens. And businesses are rehiring at least some of their workforce in certain states such as FL and CA, but the data on this chart might be overly excited.

Rental Vacancies in the U.S.

Nationally for Q1 of 2020, end of March the vacancy rate was sitting pretty at 6.6% for housing. That’s tough to beat given people move and places need time to turnover and re-lease.

New numbers of this on a national level are coming in a couple weeks, but I’m going to give you guys some interim data on this in a minute.

Please note that this national data isn’t as up to date so here’s some data on the markets my company manages properties in. If you’re out of state you can use Phoenix as a general yard stick because it’s a primary market and is a top 10 rental market in the country.

Stimulus Check Efficacy

Are people using them for what they need like food, gas, and rent? Or are they putting the money into Starbucks and Apple stands.

Well according to the average savings rate, it’s looking like we are being very conservative with our savings overall.

So can we just applaud ourselves for a moment? We just hit the highest saving rate in quite some time. In the short term, I’d say that’s a good thing.

It’s a point for the “pent up demand” argument because it’s looking like there’s money to spend if the market comes back soon. So no matter your opinion, it’s looking at least like the stim checks are keeping from too much financial disruption on main street.

So it’s looking like the average consumer (I.E. tenant) is in a decent spot with businesses rehiring, stimulus checks being spent wisely and vacancy rates that started at very strong levels, all of which reduce the risk of rentals reaching a tipping point on making the mortgage.

This generally positive data, doesn’t necessarily mean it will translate to your specific rental type. Buying and working this new market correctly is imperative to get any benefit from your rentals.

Real Rental Data

Because Fort Lowell is rooted in property management we are part of a few industry groups like NARPM and so we get these charts filled with other manager’s self reported performances on the rents and how they’re handling things. So here’s an up to date summary of what type of tenants are paying and what new management practices seem to be working best.

Which sub-markets are being affected the most?

Definitely student housing where colleges have closed shop. Especially if they haven’t announced a reopening yet, making leases for next year relatively soft.

It is unlikely to see improvement in this market until the college you’re next to announces when it’s reopening.

Also rentals meant for the elderly aren’t fairing as well because people and the elderly are afraid of sharing a space with 4 or 5 other people. Which just makes sense.

I’m no expert but this one will likely continue to be a huge issue until a vaccine is deployed, even then I see this tenant base just being more apprehensive moving forward, that said they’re the lone of the fastest growing markets.

Another affected market is the affordable multifamily housing that isn’t using any assistance such as section 8 or vouchers due to job losses and/or cut hours.

Who is doing best?

Generally the average single family rental is doing pretty well. Same with higher-end properties.

Marketing In This Current Market

This is critical if you want to maximize your benefits of this market and to minimize the damages… such as having an empty unit.

A good online presence is a must, so the stick in the yard tactic probably isn’t going to get you very far right now due to the fact that people are wary of going into potentially infected places.

So an online presence is everything right now. Which is something we’ve been pushing for years.

For example, we had one house up for rent this month and we got over 120 requests on it. Which is definitely better than the average.

I wouldn’t be surprised that online presence is only going to be getting more relevant as new habits are formed from the pandemic and as we get increasingly dependent on finding everything online.

This will range from open houses, rental searches, online rent payments, work orders, accounting, etc.

Improving Your Property for Better Results

Additionally if you’re having issues renting up you may want to beat the competition by improving the property itself in the most cost effective ways. Such as painting and new carpet yourself…. but it might not be perfect.

Perhaps consider the improvements that are high cost in cost but where labor is the main issue!

Conclusion

So to summarize, the market overall is showing that rentals have been bruised but have every ability to come back pretty quickly. With the real lasting difference being that more people will now be more open to and even prefer online options for just about everything.

Please like, comment, subscribe and stay safe out there!

// LINKS + REFERENCES

Watch More Broker Bob: Hundreds of Our Tenants Can’t Pay Rent – What We Did

https://www.youtube.com/watch?v=JdQj_BCkhDw

BBC Article regarding US Unemployment Improvements

https://www.bbc.com/news/business-52938993

FRED Vacancy Graph

https://fred.stlouisfed.org/series/RRVRUSQ156N