With so many average Americans out of work, it would be logical to assume that this has had a negative impact on landlords and owners of single and multifamily housing units.
However, according to recent reports by Marcus and Millichap both single family and multifamily sectors are weathering the pandemic storm. Let’s take a look at how each sector is fairing.
Initially, the single family market for both sales and rentals slowed as residents were sheltering in place they were not looking to make any large moves. As of mid-summer however, the market is showing signs of improvement. Sales volume was up 20% June, and loan applications have spiked.
This increase has been bolstered by pent up demand from the Springtime, as well as two additional factors: low mortgage rates and a lowered interest in high density urban living. Conventional 30 year mortgage interest rates hovered around 3% all summer, which is attractive to both investors and home-owners.
Additionally, with many consumer facing businesses and restaurants shut down and the higher risk of infection, living near high population dense areas has become less appealing.
Data shows that the buyer and tenant trends currently impacting the single family market has not impacted the multi family sector. Even with lower interest rates, the costs to purchase a single family home are significant.
Additionally, the inventory of entry level priced homes is low across the country. This represents a major hurdle to would-be home buyers and has allowed the multi-family sector, particularly lower priced class C units, to remain unaffected by the move out of dense housing.
More expensive class A units have been more affected and have trended towards higher vacancy and lowering rent to keep tenants in place.
Towards the beginning of the economic lockdown, it was predicted that vacancies and mass evictions would spread towards the end of 2020. With extended federal unemployment aid expected and the recent addition of jobs as the economy has slowly reopened, it is now unlikely that this will happen.
However, rent correction is expected, especially with higher end class A and B housing with residents less likely to be willing to pay a premium for amenities. Lower tier class C housing will be more affected by a backlog of evictions, however demand should be higher for these units.
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