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Goodbye City Life: Rising Rents Match Homebuying Hotspots

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Renters, much like homeowners, are favoring smaller more affordable markets that offer highly rated schools, strong local economies and more space over expensive tech hubs, a trend that is pushing rents up in many of the same markets where home prices are rising the most, according to the realtor.com® Monthly Rental Report released today. “Although rents across the U.S. have been growing at a slower pace since the onset of COVID-19 and the major tech hubs continue to see declines, some markets are seeing rents grow by double digits,” said realtor.com® Chief Economist Danielle Hale. “Many of the same factors that attract homebuyers to an area — highly rated schools, job opportunities, affordability and quality of life — attract renters. Like homeowners, the pandemic has given many renters the freedom to work remotely, and the rental trends reflect that reality.” In January, the U.S. median rent, which is calculated by averaging the median rent of the 50 largest metros, was up 0.8% to $1,442, below its pre-COVID growth rate of 3.2%. Despite the continued slower growth, January marked the first month since July 2020 where rental growth didn’t slow further, indicating that rent growth may have reached a floor. Seven of the top 10 metros with the largest rent increases in January — New Orleans*; Sacramento, Calif.; Rochester, N.Y.; Cleveland; Riverside, Calif.; Cincinnati and St. Louis  — were also among the metros where home prices grew more than 5% year-over-year.  Renters typically have more flexibility to move, and with remote work allowing many people to live anywhere, markets that offer affordability are in hot demand. In California, Riverside and Sacramento have become desirable alternatives to the pricey Bay Area and Los Angeles housing markets. Despite a sizable 9.6% increase in the last year, the median rent in the Riverside metro was $1,858 in January, 25.4% lower than the median rent in neighboring Los Angeles. Likewise, the median rent in Sacramento was $1,649 in January, still 36.8% lower than the median rent in San Francisco despite its 11.0% rise in the last year. Four of the top 10 markets with the largest year-over-year rent increases in January are located in the Midwest, a region that in recent years has attracted affordability-minded homeseekers looking for an alternative to the pricer coastal markets. Editor’s Note: New Orleans’ exceptional year-over-year growth in median rent was driven by shifts in the underlying inventory of rental units. The number of studio units has declined by 17% year-over-year, while one-bedroom and two-bedroom unit inventory has increased by 50% and 31%, respectively. The larger space commands larger rents, therefore driving up the median rent in the area.

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U.S. Economy Expected to Expand at 6.7 Percent Clip in 2021

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The U.S. economy is expected to grow 6.7 percent in 2021, an improvement not only from last year’s 2.5 percent contraction but up, too, compared to last month’s forecast of 5.3 percent, according to the February 2021 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. The latest forecast upgrade of full-year 2021 real GDP growth reflects greater-than-expected consumer spending in the winter months, slowing COVID-19 case rates and hospitalizations, and the likelihood of an impending fiscal stimulus package. However, the ESR Group notes that some of the expected growth quickening stems from a pull-forward of growth that was previously expected to take place in 2022; subsequently, its forecast of full-year growth in 2022 decreased 0.8 percentage points this month to 2.8 percent. The ESR Group’s updated forecast also highlights greater uncertainty and downside risks, including stronger inflation and higher interest rates, as well as potentially weaker growth if COVID-related restrictions persist beyond the spring. While housing is still expected to moderate in the new year from its unsustainably high pace in the second half of 2020, the ESR Group did upwardly revise its 2021 sales forecast on new data suggesting that the expected cooling will occur over a longer time frame than previously anticipated. Annual single-family starts were also upgraded to 18.6 percent growth in 2021, up from last month’s forecast of 12.5 percent. Combined with continued strength in refinances and an otherwise upgraded housing forecast, the ESR Group projects mortgage originations in 2021 to hit $4.1 trillion, a $0.2 trillion improvement from its prior forecast. “If 2020 was the year of the virus, then 2021 will more than likely be the year of the vaccine,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Whether the vaccines are effective, including with the new virus strains, and how broadly and timely they can be distributed remain key questions; our forecast assumes such efficacy and that they’ll be widely administered by summer. Further, the recent upward creep of Treasury rates suggests that financial markets currently expect the same.” “Consumer interest in locking-in historically low mortgage rates helped drive continued high volumes of refinancing and aggressive levels of homebuying,” Duncan continued. “We believe that this will continue in 2021. We assume that the proposed fiscal stimulus of around $1.7 trillion will be passed in mid-March, and that growth will accelerate sharply beginning in the second quarter.” “However, with the Fed committed to low rates for the foreseeable future, a recovering economy, and already the highest level of debt-funded stimulus in place since World War II, the proposed additional stimulus heightens the risk of rising inflation and interest rates, as well as a potential boom-and-bust scenario. Very strong growth in the second half of 2021 could push inflation, and thereby rates, up significantly in 2022, thus invoking a Fed response of tightening and a significant deceleration later in 2022. This is not our base case scenario, but we see it as a significant risk moving forward.” Visit the Economic & Strategic Research site at fanniemae.com to read the full February 2021 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.

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Biden’s delay on foreclosures ignores harm to marketplace as COVID-19 crisis wanes

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Gryphon USA president Richard Kruse said the Biden administration’s move this week to extend the 12-month moratorium on home mortgage foreclosures through June 30 undermines the vitality of the nation’s housing market as health and economic conditions that prompted the federal policy begin to subside. “The unprecedented federal interference into the private housing market due to the COVID-19 pandemic certainly stabilized the shelter of Americans in a healthcare emergency which is positive,” Kruse said. “However, extension of the foreclosure ban beyond the March 31 expiration fails to recognize the success of social distancing and vaccination programs against the initial emergency policy.” Federal agencies in late December extended the original moratorium to March 31 in recognition that the Biden administration might want to take another look at the situation. They did and have put forward an extreme policy not spending the effort to direct relief at those who truly need it.  Kruse adds that the extension only addresses half of the problem and keeps landlords in the dark regarding how to seek the cash flow to pay their mortgages and maintenance costs. The new extension is silent on evictions leaving landlords questioning when they may retake possession of their properties that are currently not producing income. “Landlord complaints of tenants taking advantage of the system even if they could afford payments aren’t even addressed here continuing to show deference to the tenant but not provide recourse to those that provide housing,” says Kruse.   That announcement of a coordinated extension of forbearance of loans backed by the Department of Housing and Urban Development (HUD) follows the Federal Housing Finance Agency’s announcement it would extend its moratoria on loans owned by Fannie Mae and Freddie Mac. An estimated 1 out of 5 renters are believed to be behind on their rent while 2.7 million homeowners are currently in foreclosure forbearance, according to the White House. Bubba Mills, a partner at Gryphon, stated “The move by our government is not providing a solution to the situation. It is actually causing more damage than good. Without allowing banks and investors to take a “Normal Course of Action” it is affecting more than renters and landlords. When mortgage payments are not being made, neither are taxes and HOA dues. In 2008 cities and counties ran out of money because no one was making payments. Continuing to kick this can down the road even longer continues to move this pandemic from a health problem into much more dire economic problem.” Kruse added that lifting of the foreclosure moratorium in July will not immediately mean relief for lenders and landlords as it will take several months for legal actions to commence. Still, Kruse expressed optimism that the June 30 date will solidify into a real expiration date so the market can begin working out the damage in a post-COVID environment.  For more information on this topic, contact Richard Kruse at 614-774-4118 or rfk@gryphonusa.com.

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Almost Half of U.S. Counties at Above-Average Risk for Increased Rental Property Defaults

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A new analysis released today from RealtyTrac shows that single-family rental property owners in 48% of all U.S. counties are at above average risk for default. The RealtyTrac Rental Property Risk Report gauges the relative default risk of single-family rental homes, almost 90% of which are owned by mom-and-pop investors who own fewer than 10 properties. The financial impact of COVID-19, resulting job losses, and government-imposed eviction moratoria have all contributed to reduced on-time rental payments which, in turn, can lead to potential default among these smaller investors, many of whom are highly leveraged based on loan-to-value (LTV) ratio data. According to the research, the average risk score among the country’s 3,143 counties is 50.2, with 1,514, or 48%, at above-average risk. When looking at the largest 100 counties – based on the total number of properties – the average risk score is 43.6, with 53% at above-average risk. Among these large counties, Florida, New York, and California counties accounted for 44% of the 25 most at-risk counties. New York (Erie, Kings, Monroe, and New York Counties) and Florida (Collier, Lee, Polk, and Marion) each had four counties in the top 25 ranking, and California (Kern, Riverside, and San Bernardino) had three. Mohave County in Arizona was rated as the most at-risk of the 100 largest counties in the country. “The job losses in a handful of severely impacted industries due to the COVID-19 recession have disproportionately affected renters,” said Rick Sharga, RealtyTrac executive vice president. “Federal, state, and local governments have responded by enacting eviction bans to protect tenants, but in doing so have inadvertently put many landlords at risk. And the longer the eviction bans are in place, the higher the likelihood that these landlords are going to default on their mortgages, declare bankruptcy, or be forced to sell off properties at distressed pricing, which could have a negative impact on local housing markets.” The RealtyTrac Rental Property Risk Report, using real estate and mortgage records from ATTOM Data Solutions, analyzed data from the 3,143 counties across the United States against three criteria to determine which counties might be the most at-risk of single-family rental properties going into default: the percentage of properties in the county that were rental units; the unemployment rate in the county; and the degree to which rental properties were leveraged (the loan-to-value ratio). A weighted average was created using those criteria on a scale of 0-100, with 100 representing the highest potential risk. Counties with a high percentage of rental properties, high unemployment rates, and high LTV ratios had a higher risk score; while counties with a low percentage of rental properties, low unemployment rates, and low LTV ratios were considered less at risk. Of the 100 largest counties, Mohave County in Arizona had the highest risk score at 77.2, due to a high percentage of rental properties (79%) and a higher-than-average unemployment rate (8.7%). Salt Lake County in Utah had the lowest risk score at 17.2, reflecting the county’s relatively low percentage of single-family rental homes, low LTV ratios and low unemployment rate. “While it’s completely appropriate that the government has taken steps to protect tenants from eviction during a global pandemic, it’s also completely unrealistic to assume that landlords can bear 100% of the financial burden of missed rent payments,” Sharga noted. “There’s a misperception that most landlords are corporations or institutional investors. The fact is that almost 90% of single-family rental landlords are smaller investors who own fewer than 10 properties, are often highly leveraged, and simply don’t have the financial strength to weather this storm. And financial failure by these investors has implications for both their tenants and the communities where their rental properties are located.” Six States Account for a More Than a Quarter of Highest-Risk Large Counties Of the 100 largest counties with higher-than-average risk scores, those located in six states accounted for 27%: Florida (7), New York (5), California (4), Ohio (4), Texas (4) and Illinois (3). Four states had two counties each with above-average risk scores – Arizona, Connecticut, Maryland, and Michigan. No other state had more than one of the 100 largest counties with an above-average risk score. The average unemployment rate for all of the 100 largest counties with above-average risk scores was almost a full point higher than the national average (7.62%). But while unemployment rates were one of the three criteria used to assess risk, there wasn’t always a direct correlation between a state’s unemployment rate and above-average risk scores. While California (9.0%) and New York (8.2%) had two of the highest unemployment rates in the country, Florida, which had the highest number of at-risk counties among the 100 largest, had an unemployment rate below the national average (6.1% vs. 6.7%), as did Ohio (5.5%). Regionally, the Midwest has the highest number of large counties with above-average risk scores with 12, followed by the Northeast with 11, the Southeast with 10, the West with eight, and the South with six. “Despite the pandemic, default activity is at its lowest level in decades, and the government and mortgage industry are working together to prevent unnecessary foreclosures and evictions,” Sharga said. “But there needs to be a concerted effort to backstop the landlords as well, or numerous counties across the country are going to see rising levels of foreclosures on rental properties and needless financial distress.” About RealtyTrac Founded in 1996, RealtyTrac publishes the largest database of foreclosure property information in the U.S. along with other real estate and mortgage data used by real estate investors and professionals to find, analyze and purchase residential and commercial distressed properties. RealtyTrac is owned and operated by ATTOM Data Solutions, a leading provider of publicly recorded tax, deed, mortgage and foreclosure data as well as proprietary neighborhood and parcel-level risk data for more than 150 million U.S. properties.

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Pay Ready Eliminates Friction for Resident Payments As Moratoriums Extend

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Pay Ready Inc., (formerly Debt Logic) a cloud based software where clients can manage and track everything debt related in one place, has proven to benefit companies in the multi housing sector. Knowing that there are major gaps in communication, technology, and trust from the time a file is determined to be delinquent throughout the collection process, Pay Ready deploys ongoing automation and statistically based solutions to improve collection performance while eliminating friction. Pay Ready’s capabilities cover Accounts Receivable (AR) management, resident payments and Customer Relation Management (CRM) engagement. Pay Ready’s remote software allows property managers to better view, engage and communicate with their residents, employees and vendors to achieve control over their total balance sheet. “Working with the Pay Ready Team has been a pleasure from pre to post roll-out. The transition process was effortless and the customer service provided to our teams has continued to make the partnership a valuable one. Having Pay Ready as our “in-house collections” department has taken the stress of collecting off of our teams on site,” said Lillian Mumford, Operations Process Manager at Mission Rock Residential.  “The reporting provided to our on site teams makes the posting of payments an easy process. The Pay Ready Dashboard gives me a quick snapshot of performance, and the reporting allows us to drill down when needed.” Pay Ready’s growing suite of products include: Pay Ready Exchange: secure online data exchange, where property managers can sync resident files in their accounting software to a virtual office in Pay Ready, for a global view and management of AR revenue, payments and resident engagement campaigns. Portable Payments Ready: mobile-first, device agnostic online payments processing with seamless integration into Pay Ready’s multi-experience resident touchpoints and third-party enterprise software. Supports resident payments through move-out and beyond. Team Ready: a multi-experience resident contact center and software helpdesk on the cloud, which allows property managers to collaborate and support their residents through email, phone, texts, and web portals. CRM Ready: a full featured CRM bundled with Pay Ready’s multi-experience resident touchpoints and unified user experience, for engagement teams handling high-velocity contacts. Pay Ready Marketplace: an online B2B marketplace and vendor/revenue management solution, to address the growing complexity of property management AR needs through a simple and powerful interface. Pay Ready Marketplace instantly connects property manager’s accounts with registered service vendors. To learn more, visit the new Pay Ready website at www.payready.com

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EXIT Realty Corp. International Adds NetSheet™ to Premier Partner Program

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NetSheet™, a company which provides brokerages and their agents with the ability to generate accurate buyer and seller estimates through a seamless integration with their preferred title companies right on their real estate websites, announced its strategic partnership launch with EXIT Realty Corp. International.  With this partnership, EXIT has positioned its network with the ability to provide their clients and consumers with the accurate information they want when they want it. NetSheet™ is a simple yet revolutionary tool that will empower EXIT brokerages and their agents to provide accurate and timely buyer and seller estimates that is designed to fast track listing properties, buying properties, and selling properties. “We’re proud to join the EXIT Premier Partner program as a trusted partner and to bring our solution to the EXIT network,” said Leza VanBeuren, SVP, NetSheet™. “NetSheet™ provides a simple yet sophisticated tool that is easy to use, mobile ready and designed to drive engagement and can greatly enhance the real estate experience for homebuyers and sellers. We’re excited for the opportunity to work with EXIT professionals.” “EXIT Realty enjoys tremendous momentum throughout the U.S. and we are thrilled to enhance our portfolio with the best-in-class solution NetSheet™ provides,” said Tami Bonnell, CEO, EXIT Realty Corp. International. ” NetSheet™ gives our sales professionals an easy-to-use solution that provides accurate information they need to provide a next level consumer experience that can fast track their transactions. This is a win/win for our brokers, sales associates and the clients and consumers they serve.” For more information about NetSheet™ visit NetSheet.com.

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