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Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
Randolph Taylor
Demonstrators hold signs during an eviction protest in Foley Square in New York, U.S., on Thursday, Oct. 1, 2020. Bloomberg | Bloomberg | Getty Images

The U.S. is narrowly averting a potential eviction crisis at the start of the new year, as Congress is set to pass a coronavirus relief bill that includes funding for rental assistance and the continuation of the nationwide eviction moratorium.

The bill, which is expected to be voted on Monday, provides $25 billion in emergency rental relief and a one-month extension of the nationwide eviction moratorium, through January 31, 2021.

The provisions are “a start,” Rep. Maxine Waters (D-Calif.) tells CNBC Make It. But more aid and a longer eviction ban are likely needed once President-elect Joe Biden takes office in January, she says, noting that she pushed for the inclusion of $100 billion in rental relief in the HEROES Act, the $3 trillion relief bill passed by the House in May.

“We have to do whatever it takes” to keep people housed, Waters says. Plus, more rental relief also benefits the “mom and pop landlords” who still have to pay their mortgages.

At the beginning of December, around 12.4 million adult renters reported that they are behind on their rent payments, according to the Center on Budget and Policy Priorities (CBPP), highlighting the need for aid. How the rental relief will work

The $25 billion in rental assistance will be funded through the Coronavirus Relief Fund (CRF) and administered by the U.S. Department of the Treasury. Once the funds are dispersed to states, tenants will apply for aid through state or local relief organizations.

How quickly the assistance becomes available will be dependent on where you live, Diane Yentel, president and CEO of the National Low Income Housing Coalition (NLIHC), tells CNBC Make It. Some states, like New York and California, already have established emergency rental assistance programs. Other states, like Alabama and Missouri, will have to set them up, which takes time, she says.

That’s why it will be crucial for Biden to extend the eviction moratorium when he takes office, Yentel says. It will take longer than one month for some states and localities to establish relief programs and get the assistance out to people who need it.

The funds can be used for back rent and overdue utility payments from the start of the pandemic, as well as future bills. At least 90% of the money states and territories receive must be used to provide financial assistance to households.

Renters will be eligible for relief if their household income is below 80% of the area median income (which varies by county and household size), and someone living there: Has qualified for unemployment benefits, has lost part of their income, or has experienced financial hardship because of Covid-19, or can show that they are at risk of losing their home

Landlords and utility companies can be paid directly by state and local governments as long as tenants have signed off on the application. If landlords refuse the aid, renters can apply and receive the funds and then pay their landlords. Households are eligible for 12 months of assistance but may receive up to 15 months if it is “necessary” to keep them in their home.

Renters will also be able to access case management and tenant-landlord mediation services.


Demonstrators hold signs during an eviction protest in Foley Square in New York, U.S., on Thursday, Oct. 1, 2020.Bloomberg | Bloomberg | Getty Images


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Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
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The latest data from the National Multifamily Housing Council shows that nearly half of respondents believe market conditions are looser than three months ago.

National apartment conditions could be showing signs of improvement, according to apartment owners then responded to the National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions.

The market tightness index increased from 19 to 35, which indicates a loosening market. According to the survey, 49% of respondents said that market conditions were looser than in the prior three months. Only 18% of respondents said that market conditions are tighter than the prior three months, while 33% of respondents thought the market conditions were unchanged. According to NMHC chief economist Mark Obrinsky, market conditions are continuing to deteriorate, but the market tightness index shows that there is a growing variation in the market outlook from respondents.

Other areas of the survey show improving market conditions. The sales volume index increased from 18 to 72, and 60% of respondents reported higher sales volume than the prior three months. This was a significant majority. Only 16% of respondents in the survey said that sales volumes decreased compared to the prior three months, and 19% found the market unchanged. This data shows that investment capital is returning to the market after retreating at the start of the pandemic. Historically low-interest rates and greater availability of debt has helped drive capital back to the market.

In the debt financing index, more than half—51%—of respondents are having an easier time securing financing than in the previous quarter, and 35% of respondents thought that the market was unchanged. Only 6% of respondents reported that the debt conditions were worse than the prior quarter.

Finally, the equity financing index also showed stable market conditions. Most respondents to this portion of the survey—42%—said that the market conditions for equity were unchanged from the prior three months. However, 35% reported improving conditions, while 12% of respondents found equity financing was less available than the previous quarter.

Overall, apartment owners’ outlook on the market is improving. The survey asked respondents to share their outlook on these trends, and 46% expect that these conditions will last six to 12 months beyond the end of the pandemic, while 31% of respondents believe that these trends will end when the pandemic ends. Only 8% of respondents believe that these market conditions will persist indefinitely—the most pessimistic outlook—while the additional 16% were unclear on the future of the market.


Source: GlobeSt By Kelsi Maree Borland | October 26, 2020 at 06:52 AM

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Multifamily Investment Sales Broker at Marcus & Millichap
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With sophisticated daily pricing tools, apartments today are better positioned to respond to inflationary pressures than they were forty to fifty years ago.

During the last six months, The Federal Reserve has acted aggressively to thwart the COVID economic crisis. It pushed interest rates to near zero and purchased massive amounts of securities. Add these moves to the $2.2 trillion CARES Act, and you have an enormous increase in money supply and the federal budget deficit.

In a new report, Patrick Lynch, vice president of Research and Analytics Middleburg Communities, wonders, like many observers, if these moves will create inflation in the future. And if so, will the multifamily asset class continue its traditional role of providing a hedge. 

To help predict the future, Lynch looks back to the 1970s—the last time the US experienced a significant rise in inflation—and compared the annual average rate of rent growth to the average inflation rate from 1973 to 1983 by studying three data sources.

Looking at the Personal Consumer Expenditures Price Index, rents grew slightly less than overall inflation but marginally more than core inflation stripped of food and energy.  The Consumer Price Index (CPI-U) indicates that rents grew at an average annual rate of 6.7% but it was below the average yearly inflation rate. The American Housing Survey showed that the median rent increased by an average yearly rate of 8.5%, which exceeded all measures of inflation, according to Lynch.

Lynch finds that the CPI-U measure of average annual is a bit exaggerated due to its treatment of mortgage interest and he gives more weight to the PCE measures. If you look at the AHS data, which uses constructed units to calculate overall average rent growth, then growth likely exceeded the rate of inflation over this period.

“The history of apartment rents in the 1970s and early 1980s demonstrates the resilience of the multifamily asset class and its strong potential as a hedge against inflation,” Lynch writes. “Despite lackluster job growth and high unemployment, apartment rents nonetheless kept pace with inflation during the most inflationary period to date in postwar US history.”

Better Positioned Now 

With sophisticated daily pricing tools, Lynch thinks apartments today are “better positioned to respond to inflationary pressures than they were forty to fifty years ago.”

For instance, revenue management, which didn’t exist in the 70s, can take the guesswork out of pricing decisions. 

“By taking into account factors such as exposure, market conditions, and competition to create targeted rent recommendations, management can drive the most amount of leasing demand while optimizing their revenue,” Stacy Holden from AppFolio told GlobeSt in an earlier interview.


Source: GlobeSt Les Shaver | October 23, 2020 at 07:29 AM

Multifamily Investment Sales Broker at Marcus & Millichap
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Randolph Taylor

Evictions plummeted even in cities without eviction bans.

You probably read over the last six months about a looming evictions crisis of historic scale. It’s been described as a “tsunami” and an “avalanche.” Some forecasters predicted as many to 30 to 40 million renters could be evicted.

What happened? Not much—and that’s wonderful news. Americans will likely experience a record low number of evictions in 2020. Eviction filings since COVID-19 hit in mid-March have plunged 67% from normal levels in the 17 markets tracked by Princeton’s Eviction Lab. Evictions plummeted even in cities without eviction bans. And all reliable indicators continue to show renters are (so far) paying their monthly rent at near-normal levels. This is good news not only because millions of renters haven’t been displaced as feared, but also because accurate numbers lead to more targeted, more affordable policy solutions that, in turn, increase the odds of lawmakers finally approving much-needed direct aid for renters truly in need.

How did forecasters get it so wrong?

It’s easy to credit a patchwork of local and state eviction moratoriums—followed by the CDC’s national ban enacted in September. But our extensive analysis reveals that moratoriums are just one of many critical factors limiting evictions in 2020. Some of the forecasters who made headlines for doomsday predictions chose to ignore or give scant attention to critical factors helping keep evictions low—high rent collection rates, sympathetic property owners working overtime to accommodate distressed renters, and backed-up court systems.
Interestingly, dire headlines typically trace back to just three forecasters with peripheral connections to real estate. At the same time, media reports frequently downplayed studies from real estate researchers showing significantly less distress— including those from RealPage, the Mortgage Bankers Association, and the Urban Institute.

One of the most widely cited eviction prognosticators is Stout, a consulting firm that has done several studies on evictions for different organizations. Stout forecasted about 11 million potential eviction filings over a four-month period beginning May 13, according to the consultant’s website, among the 16.2 million households “at risk of eviction.” Stout also predicted 2 million eviction filings in both August and September – meaning 4x the annual number in just a two-month period. Both estimates appear to have overshot by a huge margin. Stout remains very bullish on evictions. In a September report produced for the National Council of State Housing Agencies, Stout wrote: “Stout estimates that by January 2021, up to 8.4 million renter households, which include 20.1 million individual renters, could experience an eviction filing.” That outlook appears highly unlikely.

Another forecast that grabbed headlines came from the Aspen Institute, a think tank, in conjunction with the COVID-19 Eviction Defense Project. This group estimated in June that “19 to 23 million, or one in five of the 110 million Americans who live in renter households, are at risk of eviction by September 30, 2020.” While there is no uniform measure for “at risk,” there is plenty of evidence that actual evictions through September ended up a small fraction of Aspen’s forecast. Curiously, even as the economy showed signs of gradual recovery over the summer, Aspen doubled down in a follow-up report in August, estimating that “30–40 million people in America could be at risk of eviction in the next several months … If conditions do not change, 29-43% of renter households could be at risk of eviction by the end of the year.” That scenario appears nearly impossible to pan out.
A third forecaster, Amherst, opined in May the possibility of evictions registering “in excess of the levels we saw in the wake of the Great Recession.” That view has, so far, proven incorrect.

How did forecasters err so dramatically? A study of methodologies and additional datasets reveals multiple explanations. Most of the dire forecasts inexplicably downplayed or ignored a number of major factors that have kept evictions low: relatively normal rent collection rates, widespread eviction moratoriums, a delayed legal system, and a sympathetic base of property owners providing extensive measures to give renters unprecedented flexibility.

Instead, some “tsunami” forecasters leveraged questionable assumptions and experimental datasets. One forecaster, for example, initially assumed a 25-30% unemployment rate (roughly triple the current rate). Others relied heavily on a new Census dataset called the Household Pulse Survey, which the Census itself labels as “experimental” and discloses the risk of overstating distress due to non-response bias.

Additionally, good forecasts wisely separate newly (or additionally) distressed households from the millions challenged even prior to the pandemic, as the latter group is largely accounted for in pre-pandemic eviction baseline numbers. Failing to make that distinction can inflate eviction estimates.

Why does accuracy matter? Because as Congress continues to wrangle over relief packages, bloated price tags decrease the odds of approval for much-needed direct renter aid programs and increased funding for new affordable housing. Both are badly needed.

It’s tremendous news that evictions remain so low. But we also must acknowledge that renter distress is very real and was very real even prior to COVID-19. Evictions would be much higher this year if not for the yeoman efforts of property owners, eviction moratoriums, and—most importantly—the millions of renters paying rent every month. Right now, property owners are taking on much of the burden. But that’s unsustainable, adding more risk for an already fragile U.S. economy. Additionally, the CDC’s national eviction ban is merely a bandaid. Rent is still due when the moratorium expires, and direct renter aid programs are needed to protect both renters and property owners (most of which are small family businesses).

Defining the problem accurately allows for more precise, targeted, affordable solutions. Well-intended researchers may be unintentionally sabotaging their own cause.



Source: GlobeSt By Jay Parsons | October 05, 2020 at 06:53 AM

Multifamily Investment Sales Broker at Marcus & Millichap
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Randolph Taylor