Author Topic: What do others think of the risk to the rental market?  (Read 1309 times)


rothwem

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Re: What do others think of the risk to the rental market?
« Reply #1 on: October 27, 2020, 01:55:54 PM »
Your linked article is behind a paywall.

cool7hand

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Re: What do others think of the risk to the rental market?
« Reply #2 on: October 28, 2020, 05:12:43 AM »
For whatever it's worth, I don't pay for the WSJ and I can read the article. Maybe I have not gone over whatever number of articles the WSJ gives one for free per month?

uniwelder

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Re: What do others think of the risk to the rental market?
« Reply #3 on: October 28, 2020, 05:16:17 AM »
Sorry, I can't read it either.  Can you give a quick, 2-3 sentence general idea of what it says?

Dogastrophe

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Re: What do others think of the risk to the rental market?
« Reply #4 on: October 28, 2020, 05:30:57 AM »
Here is the copy/paste of article:

Struggling Rental Market Could Usher in Next American Housing Crisis

Fallout from missed rent payments is threatening a swath of the U.S. population, as the expiration of eviction bans draws near.

A large number of renters have been unable to pay some or even all of their rent since March, when the pandemic temporarily shut down most businesses. Many businesses remain closed or only partially open, pushing renters into unemployment and draining their savings.

Federal and local eviction moratoriums have protected many of them from losing their homes if they missed payments during the pandemic. But the national eviction ban and some state and city protections are set to expire by January or sooner. Renters then will be on the hook for months of missed payments, which even those who have jobs could struggle to pay.

Estimates of total outstanding rent debt vary widely. Yet by any measure, the effects of missed rent payments are bound to imperil millions of renters and wash over the broader economy.


A study of unemployed workers released last week by the Federal Reserve Bank of Philadelphia calculated outstanding rent debt would reach $7.2 billion before the close of 2020. Moody’s Analytics estimates that it could reach nearly $70 billion by year-end if there is no additional stimulus spending. The economic-research firm calculated that 12.8 million Americans would then owe an average of $5,400 from missed payments.


Even the larger figure would be far less than what was lost when the $1.3 trillion subprime-mortgage bubble burst, leading to a national wave of defaults and foreclosures. But the tens of millions of people potentially caught in a web of home-rental debt and eviction would far exceed the 3.8 million homeowners who were foreclosed on in 2007-2010.

Many people financially secure enough to own a home are better positioned to navigate the economic downturn. The high unemployment rate has spared most white-collar professionals. Houses are selling at record rates, and home prices have rarely been higher. Recently moribund suburban-housing markets in the Northeast and other regions have sprung back to life as buyers seek more space while working at home.

But about a quarter of American renter households with children are now carrying debt from not paying rent, U.S. Census Bureau surveys show. Women and people of color are disproportionately more likely to owe rent, according to the census data. Black and Latino Californians were twice as likely as white Californians to face rent insecurity amid the pandemic, an analysis by the University of California, Los Angeles found.

Mounting rental debt could also impede the path to a U.S. economic recovery, when 30 million to 40 million people from New York City to San Francisco face potential eviction once moratoriums expire, according to estimates cited by federal government officials.

“These households will have to make some pretty massive financial choices and pull back on other spending to pay their rent,” said Mark Zandi, Moody’s chief economist. “That’s a hit to the economy.”

In the early weeks of the pandemic, many renters tried to scrape together their rent by borrowing money from friends or family. Some moved to credit cards, which could mean the total debt tied to rent is greater than what can be counted from missed payments alone.

Credit payments to small and medium-size businesses connected to rental real estate increased by more than 70% in the spring, according to the Philadelphia Federal Reserve. The data showed that through the fall these payments have remained some 50% higher than during the same period in 2019.

Kate Bulger, a financial counselor specializing in housing debt at the Money Management International counseling firm, said the number of tenants she works with who report putting payments on credit cards has exploded. This shift of debt from landlord to plastic can harm renters’ credit long term, Ms. Bulger said, by using too much of their available credit line, which can lower scores.

“Even if now they are able to make their rent payment,” she added, “that huge inflation to their credit-card debt has become a new threat to their budget and their ability to cover all their expenses.”

Other renters falling behind are now on payment plans arranged with their landlords, allowing them to pay small minimum amounts each month. Some landlords are charging punitive late fees on top of what is already owed, making the debt higher than just the face value of the rent.

In Miami-Dade County, Fla., Isis Bouzy is struggling to make the $665 monthly payment for the apartment where she raises her three children. She lost hours as a hair stylist during the pandemic and now owes $2,175 in back rent. She says her landlord wants to evict her.

She has lived in the unit for five years and said she had been working to fix her credit before the pandemic started. “I’m not sure where this will leave me,” she said. “I want to be a homeowner one day, and an eviction won’t look good.”

HOUSING AMID A PANDEMIC
New Orleans Braces for Evictions as Renters Fall Behind, Belongings Pile Up on Streets (Aug. 24)
U.S. Existing-Home Sales Rose Nearly 25% in July (Aug. 21)
Out-of-Work Apartment Tenants Putting Monthly Rent on Plastic (April 15)
The financial consequences of falling months behind on rent can linger for years, and most landlords are unlikely to forgive these debts, credit specialists say. “If you don’t pay it back that can escalate to things like judgments, potential garnishments against your wages,” Ms. Bulger said.

This kind of negative information on a credit report also makes it more difficult to secure new housing accommodations, and future landlords could require a higher security deposit or advance rent payments.

While many landlords have let tenants continue to occupy units without paying all of their rent by establishing payment plans, there are doubts about how many tenants will ever be able to pay back all of what they owe.

“Am I concerned that some tenants will leave me holding the bag? Yes,” said Robert Nelson, a New York City landlord who owns middle-income apartment buildings. “But what choice do we have?”

uniwelder

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Re: What do others think of the risk to the rental market?
« Reply #5 on: October 28, 2020, 06:28:50 AM »
Considering the number of people affected, I'm assuming the government will step in after elections (either during lame duck session or after January) and provide some fix for renters and landlords.

SndcxxJ

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Re: What do others think of the risk to the rental market?
« Reply #6 on: October 28, 2020, 07:31:20 AM »
The government could fix this issue for renters, but I don't have a lot of faith in that idea.  If history is any indicator, probably a lot of poor people will be evicted and this will lead to a larger disparity between those that made it through the pandemic well and those that didn't, which happens to align along preexisting disparity lines of race and wealth. 
Ultimately, the pandemic has caused some damage to rental housing that has not yet been fully realized.

waltworks

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Re: What do others think of the risk to the rental market?
« Reply #7 on: October 28, 2020, 08:51:47 AM »
Someone will either have to bail out the renters or the landlords (really, that basically means the landlords, since the renters already have been "bailed out" by not being evicted).

If that happens, things (with some addition to our pile of national debt) will keep chugging on. If low wage jobs don't come back, the same problem will reoccur, of course.

If no bailout, for whatever reason, then you'll see a ton of landlords losing apartment buildings to the bank. The SFH/small landlord market is mostly higher end properties and probably isn't affected IMO.

As others have already said, this is mostly poor people getting screwed even worse because of Covid. That's the real story.

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Car Jack

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Re: What do others think of the risk to the rental market?
« Reply #8 on: October 28, 2020, 10:03:48 AM »
Here's what I think.

Based on numbers, we're coming into the third wave and it is going to make the first two look like Kindergarten.  I expect various local governments to impose eviction moratoriums.  Since landlords have already been subjected to the previous ones, some are going to go belly up and give the rental units back to the bank.  Renters?  I don't know.  I suppose some will stay in place and not pay anything.  In general, it's not a good time to own rental property.

rothwem

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Re: What do others think of the risk to the rental market?
« Reply #9 on: October 28, 2020, 11:33:54 AM »
If no bailout, for whatever reason, then you'll see a ton of landlords losing apartment buildings to the bank. The SFH/small landlord market is mostly higher end properties and probably isn't affected IMO.

FWIW, I don't think the banks really want anything to do with owning rental properties.  I think they'll be willing to bend a LOT to not have to deal with collecting rent from people who can't pay. 

waltworks

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Re: What do others think of the risk to the rental market?
« Reply #10 on: October 28, 2020, 11:57:09 AM »
If no bailout, for whatever reason, then you'll see a ton of landlords losing apartment buildings to the bank. The SFH/small landlord market is mostly higher end properties and probably isn't affected IMO.

FWIW, I don't think the banks really want anything to do with owning rental properties.  I think they'll be willing to bend a LOT to not have to deal with collecting rent from people who can't pay.

That depends on who owns the note, of course, but you might well be right. If so we'll see apartment buildings with deadbeat/jobless tenants on fire sale.

-W

mntnmn117

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Re: What do others think of the risk to the rental market?
« Reply #11 on: October 28, 2020, 12:16:34 PM »
Yeah I'm amazed how many people have forgotten about 2008 already. I knew a guy who was building a little real estate empire and was forced to declare bankruptcy when it all fell apart. The fatal mistake is people make the jump from a few profitable places (1-3 places they did really well on), scaling up from 3 to 8 properties late in a real estate cycle.

Apartment rents are down 10% in Seattle.

SwordGuy

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Re: What do others think of the risk to the rental market?
« Reply #12 on: October 28, 2020, 04:03:26 PM »
Yeah I'm amazed how many people have forgotten about 2008 already. I knew a guy who was building a little real estate empire and was forced to declare bankruptcy when it all fell apart. The fatal mistake is people make the jump from a few profitable places (1-3 places they did really well on), scaling up from 3 to 8 properties late in a real estate cycle.
No kidding.   Then again, I'm amazed people still haven't figured out gas guzzlers are a bad idea after the 1973 Arab Oil embargo and all the gas price spikes ever since...

We have 4 rental properties.   Holding costs for them empty are less than $10,000 a year (in total) and the loss can be written off on taxes so that mitigates a portion of that.   We came late to the FIRE bandwagon and didn't want leverage risk.   Didn't need the benefits of having it and most certainly didn't need the downsides.

A bit of leverage can be awesome.   An entire real estate empire built on lots of leverage is way more risky than I would feel comfortable with.    Then again, I'm not a gambler.  If I make a bet with someone it's because I already know I've won.   I like to do my finances the same way. :)

Papa bear

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Re: What do others think of the risk to the rental market?
« Reply #13 on: October 28, 2020, 05:33:35 PM »
These people, even if unable to pay, still need a place to live.   It’s not like 100% of these tenants can be absorbed into occupied housing stock.

I can see class C property that will see price reductions because of increased vacancy, lower rents, and missed payments, but I can also see a lot more people on subsidized housing, like section 8. 

I find this problem will hurt the big rental companies much more than your everyday run of the mill landlord, though I can’t foresee this being more than a 1 or 2 year “bad” rent year.


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SwordGuy

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Re: What do others think of the risk to the rental market?
« Reply #14 on: October 28, 2020, 06:35:34 PM »
So far, knock on wood, all our renters have continued to pay.

Buffaloski Boris

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Re: What do others think of the risk to the rental market?
« Reply #15 on: November 01, 2020, 10:32:32 AM »
Seems to me like an awesome time to invest in learning and expanding skill sets. For later.

Dicey

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Re: What do others think of the risk to the rental market?
« Reply #16 on: November 27, 2020, 06:39:31 PM »
So far, knock on wood, all our renters have continued to pay.
Ours, too. The words "Fixed Income" never sounded so good. All of our rentals are in a Senior Community, and all of our tenants have been relatively unscathed by this pandemic. We'll see what the future holds...