What did vacancy/eviction rates look like in 2009-2010?

Question

While we may already be in, (or close to) a technical recession, as of this post we still have a very strong job market in most sectors right now. Supposedly, rental properties hold their value and vacancy is low during downturns because of people trading down to rent, etc. However, I am skeptical that at a time of job loses rentals will not experience higher rates of turnover, non payment of rent and higher eviciton rates. I have only owned rentals for about 6 years, so curious for those of you that owned rentals the last time we had a real uptick in job losses (2008-2010), how did your portfolio hold up on lost rent due to nonpayment, higher vacancy rates, etc? I am specifically thinking about the C+ through B class SFR market.

Jim K. · Answer

@Amir Navabpour

To back up and amplify what @Jay Hinrichs and @Nathan Gesner have said: it wasn't the same everywhere. Here in the immediate Pittsburgh area, mortgage failures and foreclosure sales didn't start to go through the roof until the end of 2011. By the start of 2014, we were through the worst of it. It was a slower burn here, and we didn't see any sort of massive jump in rental demand, just a steady rise, and it was limited to certain neighborhoods.

Conversely, our local homebuilding associations and tradesmen unions were DEVASTATED. A lot of people simply packed up and left. We still aren't anywhere near where we were on tradesmen numbers in 2008 and continue to suffer significantly from the skills gap problem. So the worst long-term effect of the 2008 meltdown here is that we STILL don't have enough people to fix the elderly housing stock we have. The best tradesmen, faced with an embarrassment of riches, won't work with owners of cheap rental properties and go to the neighborhoods they're in at all. This continues to contribute to the affordable housing problem in the city.

Jay Hinrichs · Answer

there were the poster child areas that experinced massive non pay and vacancy.

these were

1. PHX

2. Vegas

3. Central CA and inland empire

4. Atlanta metro

5. Florida

basically where new construction was a big driver of the economy and new construction stopped and subs lost jobs and had to relocate.

my C class in the Deep south also had issues.. of course Section 8 trucked along but no one paid their co pay LOL.. Ohio and Michigan were in bad shape the big investment note buyers would not buy notes in those two states for many years.

I had 450 loans out on C class assets from Chicago to Birmingham and Altanta and in between I foreclosed on or took back from over 250 investors who could not make a go of it .. then had to spend 2 plus years unwinding all that baggage..

Bill B. · Answer

You’d have to ask local investors who invested in the same type of properties in the same neighborhoods, and that might or might not help.

I always hear about how there was blood in the streets, massive vacancies and rent cuts in Vegas during the GR. And while I only owned SFR, and only in the suburbs. We were raising rents 2-3 times faster than before the recession. We had a flood of demand from previous home owners with no desire to become apartment renters. To be fair we were only raising rents 8-10% per year. But we could barely eek out 3-5% during the big run up from 2005+. It was just too cheap and easy to buy instead.

Kevin Sobilo · Answer

@Amir Navabpour, all real estate is local! So, national trends are not what you are likely to experience.

If you want to profile what might happen with different classes of rentals here are a couple thoughts to consider.

Working class people in C class housing who are laid off during an economic downturn will get by on unemployment and SNAP (food stamps) because those things will cover much of what their income was when working. So, they will get by until they get a new job. Working class jobs are more easily replaceable.

This is also why they talk about people downgrading. Someone in an A class rental CANNOT afford the same lifestyle when laid off unless they have substantial savings to draw from because unemployment doesn't pay enough. Also, their jobs may not so easily be replaceable. So, they may downsize or need to relocate.

Keep in mind a downturn might only see 2-4% more people unemployed so it isn't affecting the vast majority of people. Also consider that many people right now are choosing not to even work! So, apparently more people have more money and don't need to work right now. So, their families may not be as stressed by an economic downturn.

Nathan Gesner · Answer

You have lived enough life for ten of us!

Mark F. · Answer

I house hacked in 2010/2011 in Florida and had no issues finding roommates to pay by the room, for a low price point. Apartment vacancies were there, they had to offer concessions. People were scrambling for jobs, moving in with their parents/friends (like me), and there were obviously tons of SFRs sitting vacant. I bought in a great neighborhood which never turned bad but didn't appreciate for years. Like others have said, I like B areas for that reason. A class downgrade to it in tough times and C class upgrade to it in good times.

Edit- I wasn't some, nor still am, a big time investor. I just owned an SFR back then and was aware of the roommate situation for the time.

Nathan Gesner · Answer

I would like to hear more personal experiences. Most BiggerPockets members started buying after 2010 and have no experience with it. I started managing rentals in 2010 and it remained a strong market in my area.

Chris Seveney · Answer

@Amir Navabpour

Difference between vacancy and lost / uncollectable rents. In some C areas it dropped into the 80’s. But absolutely it goes by asset to asset basis

Bjorn Ahlblad · Answer

I had retals south of san Francisco at that time. No problems and the other LL’s I have talked to in the same market did great as well.

What did vacancy/eviction rates look like in 2009-2010?

What did vacancy/eviction rates look like in 2009-2010?

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