The Cascade Team Blog

The United States real estate market has been fairly turbulent over the last several months. This — of course — has been due in large part to the cross-market uncertainty wrought by the COVID-19 pandemic. Young families, retirees, and early career professionals have abandoned their NYC and LA apartments in favor of more land and lower purchase prices. This migration — which began before the crisis due to skyrocketing rent prices — has exploded as more Americans shift to remote work. Holds on evictions and stay at home orders across the country have also contributed to this change. They have highlighted the housing crisis in large cities — leaving many renters, landlords, and property investors in the lurch. Follow below to learn more about how COVID-19 has affected the rental market in particular, and how this trend may continue or revert.

Unemployment and Rising Rental Debt

Much of the country reopened after the mandatory lockdown — with many Americans returning to work in either full or limited capacities. However — even after the nationwide reopening — millions have remained unemployed.  One in four adults have struggled to pay their bills in full. This has been true since the COVID-19 pandemic struck the US in early February. From February to July, unemployment assistance totaling $600 extra weekly aided many. Unfortunately, that extra help has since dried up — with Congress failing to pass additional stimulus or unemployment assistance bills.

A third of American adults  have dipped into savings or retirement accounts. They have done so “to make ends meet” since the COVID-19 pandemic began. One-third of American adults — 32%— has also struggled to make rent or mortgage payments. About one-in-six have borrowed money from friends or family or had gotten food from a food bank.” The loss of income and mounting debt resultant from the pandemic’s impact on the American economy has had horrific effects on the disadvantaged. Thas most severely affected adults with lower incomes, those without a college degree and Black and Hispanic Americans.

Researchers from the Federal Reserve Bank of Philadelphia estimated that by December around 1.34 million renter households will owe back rent. This debt has accrued as a result of pandemic-related job losses. This number of renter households equates to roughly 4.2% of all renter households. The total back rent owed by December could be around $7.2 billion…averaging to around $5,400” per household. 

How Mass Migration Could Cause a Housing Crisis — During the Global Coronavirus Pandemic

A change in demographics could affect housing in the long-term. The recent Federal Reserve Bank of Philadelphia study mentioned above found that 12.8 million Americans have been affected thus far. This number has far outweighed the number of people displaced during the mortgage and general housing crisis of the 2007/8 crash. However, the two crises are not substantially comparable. Instead of a bursting bubble and plunging home values, during the COVID-19 pandemic housing prices have actually continued rising as Americans have moved in droves from the city to the suburbs — where prices have skyrocketed.

This has meant a banner year for suburban sellers. However, it has produced complicated fallout in urban areas where renting is more common than owning. Urban areas have experienced a precipitous — and not yet lifted — collapse in rental prices since mid-March. The collapse was spurred by two elements. First was the lack of tenant ability to pay their rent. The second was the lack of legal recourse available to landlords as mandates halted the right to evict tenants unable to pay their rent. As these mandates fizzle and disadvantaged renters are once again on the hook for missed rental payments, a wave of evictions is expected. This wave is anticipated to result in a massive increase in homelessness — particularly for families with children — in major cities. Suddenly, thousands of units will become empty, and — with many wealthier renters having moved away from urban areas to the suburbs — these units might sit empty for quite a while until landlords lower rent. 

For more details and answers to the above concerns, done hesitate to reach out and ask. AS always, I'm here to assist,

Tom

"GOD Speed"