Top metro markets are showing negative rent growth on a month-over-month basis, according to the latest Multifamily National Report from Yardi Matrix.
“With April’s unemployment rate soaring to 14.7 percent, further pain is likely in the coming months,” Yardi Matrix says in the report.
“April rents signaled the beginning of trouble, growing by 1.6 percent on a year-over-year basis but declining eight dollars from March. This marks the biggest one-month decline in our dataset, including during the Great Recession, and puts rents right back where they were in August 2019.
“The pain in rents is likely to be intensified for the lifestyle-asset class, as major cities struggle with younger people extinguishing their leases and moving home,” the report says.
Rent-growth report highlights
- April rent growth began to show signs of reversal, as the country moved into month two of stay-at home orders. April collections were strong, based on data published by the National Multifamily Housing Council, despite more than 33 million Americans filing for unemployment in the last seven weeks.
- Many states have begun to relax their shelter-in-place rules, but returning to life outside of lockdown will require changes to normal daily life for some time, absent a pharmaceutical solution.
- Major gateway markets and tech hubs have already seen declining rents on a month-over-month basis. Many of these markets have had some of the highest COVID-19 infections in the country, while others seemed unscathed. While pain will be felt nationwide, tourist-based and oil-heavy markets will likely be the hardest hit.
The report points out that while reports show 90 percent of residents made rent payments in April, and May looks strong as well, it was likely that stimulus checks and unemployment payments helped tenants make those payments.
The report cautions that “with the additional $600 in unemployment insurance provided through the CARES Act ending in July, many renters might choose to conserve their cash in the coming months as evictions are paused in many cities and states.
“Residents’ notices to vacate are down in the renter-by-necessity class, as well, as they choose to stay put, especially in more affordable units,” the report says.
As states and cities start to relax rules and non-essential businesses begin to reopen their doors, “the question remains whether Americans will want to return to work in the short term.
“Right now, 38 states replace at least 100 percent of lost income through unemployment insurance,” the report says. “Plus with the CARES Act providing an additional $600 weekly on top of this through July, “the short-term incentive to work is diminishing—especially in lower-cost states.”