COVID’s 5 Least & Most Impacted Multifamily Markets

22 Replies

According to Yardi Matrix most recent publication, “COVID-19: A Game Changer for Multifamily", nationally, rents have dropped by 0.4% since the arrival of COVID. This past week I decided to focus on some key areas of data: which markets have seen the largest increases and decreases to rents during the onset months of COVID-19, as well as the current unemployment rates and demand for apartments within those respective markets. Factors such as employment and demand are two key components to take into consideration when evaluating which markets to invest in, as you well know. I thought you might find the data helpful in keeping up with current market trends. Interpretation can of course go in several direction, but what’s most interesting about this current trend is it seems the markets with less demand for multifamily housing display a more direct and severe impact, which is why you are more likely to see operators being forced to lower rents. Remaining vigilant of market conditions can allow you to modify your strategy, and adjust to ensure you can still achieve your overall investment goal even in challenging circumstances!

The 5 Least Impacted Markets:

5. Omaha, Nebraska


· 2-Month Rent Change Post C19: +0.8%

· Current Unemployment Rate: 6.5%

· Percentage of Renters: 40%


4. Huntsville, Alabama


· 2-Month Rent Change Post C19: +0.9%

· Current Unemployment Rate: 5.1%

· Percentage of Renters: 42%


3. Memphis, Tennessee


· 2-Month Rent Change Post C19: +1.3%

· Current Unemployment Rate: 7.2%

· Percentage of Renters: 42%


2. Mobile, Alabama


· 2-Month Rent Change Post C19: +1.3%

· Current Unemployment Rate: 12.6%

· Percentage of Renters: 44%


1. Portland, Maine


· 2-Month Rent Change Post C19: +1.7%

· Current Unemployment Rate: 10.2%

· Percentage of Renters: 55.7%


The 5 Most Impacted Markets
:


5. Boston, Massachusetts


· 2-Month Rent Change Post C19: -1.5%

· Current Unemployment Rate: 16.3%

· Percentage of Renters: 51%


4. Nashville, Tennessee


· 2-Month Rent Change Post C19: -1.7%

· Current Unemployment Rate: 15.2%

· Percentage of Renters: 46%


3. San Jose, California


· 2-Month Rent Change Post C19: -1.7%

· Current Unemployment Rate: 5.0%

· Percentage of Renters: 26%


2. San Diego, California


· 2-Month Rent Change Post C19: -1.8%

· Current Unemployment Rate: 13.9%

· Percentage of Renters: 39%


1. Midland-Odessa, Texas


· 2-Month Rent Change Post C19: -8.6%

· Current Unemployment Rate: 12.4%

· Percentage of Renters: 30%

Sources:

Yardi Matrix

US Bureau of Labor Statistics

RentCafe.com

@Ellie Perlman Thank you for sharing this data. I am an investor in San Diego and wasn't aware that the San Diego rental market was so affected by COVID. Especially since we stayed relatively healthy throughout the past few months compared to other metropolitan cities. 

You likely used the stats that were available, but if I were judging most/least impacted cities I would not use the change of rent as the criteria but would use the rate of delinquency (I do not know that this info is available on a city by city basis).  This is especially true for rent changes +/- <2% (which is almost all of the cities listed).

I think that Boston is going to continue to be hit very hard as the local universities and colleges go mostly to virtual learning this fall.  I anticipate large swaths of the city to be fairly vacant (Allston, Brighton, Mission Hill, etc.).  Might be tough for smaller landlords that don't have the reserves.

@Ellie Perlman thanks for sharing. I operate in Memphis & our market is linear year over year to a point it’s almost boring. However, boring could also be defined as predictable. I’ve never had so many rental applications, tours of my available properties, and move-ins as I have these past 4 weeks. It’s possible the $600 weekly stimulus money has sparked this uptick in rentals of single family homes, Or it could be the desire to please a Home instead of an apartment.

I'd like for this to be true, as I'm finally moving back to socal next month (San Diego, will rent for a year at least). I've been watching zillow religiously for some time and houses still go quickly with no price drops necessar,y lots of applications, etc.

I have noticed that rents have stopped going up, maybe they are down very slightly from a year ago. More people are allowing pets or saying contact manager. From the person I know who is there and has rentals, I hear everyone is nervous about the future, but pleasantly surprised thus far. The CARES act runs out July 31 (actually july 25) and if the HEROES act (would continue the cares act through jan 2021) is not implemented, we could start seeing price movement.

So, while I would like to see price drops, I'm still looking at 3k+ for any decent 3br SFH above the 8 from PB to la mesa. Maybe it will help that I'll be ok with starting Sept 1 or even slightly after in a place, rather than trying to get in at the more hectic July 1 or Aug 1 turnover time.

As a Portland, ME resident and young investor in the surrounding communities, I can tell you I'm seeing this play out anecdotally. Southern Maine is a crazy multi-family market right now and I think it will continue up as YUPPIES in the northeast trade big city congestion for coastal Maine living. I'm in the process of closing my first duplex in Biddeford, ME! Thanks for sharing. 

I've got rentals in Tucson, AZ and I haven't seen the market dip (but I don't rent to university students). Like Boston, any University town is going to see some rocky months ahead as the various distance learning decisions roll through the rental markets. 

Originally posted by @Greg Hayes :

I've got rentals in Tucson, AZ and I haven't seen the market dip (but I don't rent to university students). Like Boston, any University town is going to see some rocky months ahead as the various distance learning decisions roll through the rental markets. 

I hope Santa Barbara qualifies as will have some lowering of prices. My son is an incoming freshman at UCSB. UCSB has announced a lottery for the dorm rooms (I think we find out shortly). A quick look at prices of units not supplied by UCSB show a 3 BR with 6 students starts at ~$1k/month per student (Own bedroom is double the cost). I understand they have more tenant turnover, students can be rougher on property than more mature and possibly responsible adults, and that the summer is a high probability vacancy (shorter duration lease) as most STR tenants will want something better than student housing and it would be a pain to furnish/unfurnish for the short out of school year.

I recognize the costs and suspect for the value of the RE and associated effort/risk, those rents are not outrageous but they seem outrageous.  

My son has suggested buying a travel van and he lives out of the van.  Might be a business plan for a motorhome, camping facility not far from campus.  Multi restroom, shower.  Laundry room and entertainment room (TV, foosball, table tennis, pool table) would be bonus.

Originally posted by @Storm S. :

@Dan Heuschele Santa Barbara prices are just going up due to pent up demand and lack of supply.

If UCSB opens up fully, but the dorms are at half capacity, the demand on the housing outside the dorms increases even more.   $1K/month to share a room in a 3BR unit may seem like a bargain after the lottery and a bunch of students are all looking for housing at the same time.  We are planning to wait on the results of the lottery and wish for a dorm room.  If we do not get a dorm room, we may be scrambling for lodging and have to pay what is necessary.   

I suspect the UCSB cost estimates are going to be significantly lower than reality at least until the dorms can provide full occupancy.  This will be especially true for families that do now want their child to be sharing a room in the time of COVID.  We want our child to have his own room due to COVID but starting at $2K/month is more than we were budgeting so he needs to get a dorm room.

Portland, Maine is a great market. We own 500+ units and manage another 500+ units for other investors and we are 100% collected since this began, while still being able to take minor rent increases. If you want somewhere to invest with great quality of life, then Maine should be where you go! 

Awesome facts. 

Thanks for sharing. I'm a turnkey provider in Memphis, TN and we have an in house property management company. We were very surprised to not see any drastic changes in our rent collections nor our rental applications. Rent collections dipped slightly but rental applications have increased YoY comparison.  

@Dan Heuschele yeah it’s going to be crazy even though UCSB is mostly online, just about all the landlords I have spoken to in Isla Vista, are fully leased for the fall and didn’t really have a issue leasing during the summer months.

@Ellie Perlman Job growth and unemployment are huge drivers of demand. If people can't work where they live they will move, there's metrics that point to an influx of people in areas with higher Job growth. Boise, Portland and Seattle are some examples of cities where housing demand has increased appreciation and double digit rates!

@David Barnett I go to Northeastern and can confirm that a ton of people, both US and international students, have already decided not to return in the fall (myself included) and my friends at other Boston universities are going through similar situations. It'll be interesting to see what happens because so many upperclassmen opt for off-campus apartment rentals.  

Originally posted by @Jacob Peistrup :

@David Barnett I go to Northeastern and can confirm that a ton of people, both US and international students, have already decided not to return in the fall (myself included) and my friends at other Boston universities are going through similar situations. It'll be interesting to see what happens because so many upperclassmen opt for off-campus apartment rentals.  

Thanks for sharing your "in the moment" perspective of what you and your friends are going through with the disruption to in person classes in Boston.  Also, nice to hear from another husky (and a D'Amore-McKim attendee, too). I hope some of your friends didn't go to that other university that doesn't have a campus on Comm Ave (just three green line stops on the worst green line branch, the B branch!).