The multifamily industry continues to grapple with what the COVID-19 pandemic means for business and how to best respond. In June we gathered industry data from REIS Moody’s Analytics, SARES-REGIS Group and TransUnion.
The goal is to understand the implications to rental housing, how renters are being impacted and the early indicators of credit degradation on renter's credit profiles compared to pre-pandemic. In addition to first-hand insights from the panel, TransUnion revealed the results of its ground-breaking Rental Housing Financial Impact Study, which evaluated over 2.4 million consumers.
Concerns about paying rent
Moody's Analytics forecasts that the second quarter of this year is going to be hit hardest — historically severe in fact, with annualized GDP growth to be anywhere from negative 30% to 40%.
In terms of property value, compared to other segments of the rental industry, the blow to multifamily is, on average, moderate. Multifamily is predicted to be rise by just 7.8% compared to other rental segments which are experiencing double-digital increases, including industrial real estate, office and retail.
Rental payment trends
On average, we are seeing only a 4% to 8% rent collection loss for apartment properties across the nation with numbers improving slightly in May.
At the time, the percentage of rental payments and rent collections is sustaining. Rent payment collection was 89%, representing a 1.3% increase year-over-year to the same period last year when 88% of renters paid full or partial rent.
Will this hold true if unemployment remains persistently high? As with many matters related to the crisis, that remains to be seen.
How is the pandemic impacting credit card utilization?
One of the more surprising findings has been that renter debt level, credit card utilization and the opening of new accounts actually declined. Average total balances went down by 1.2%, credit card utilization rates were down by 9.1% and renters opening new lines of credit fell to 8.3% between March and April.
It seems that renters are being very prudent in their debt spending, indicating that they're not relying on credit cards to engage in spending behaviors. This could also be a sign that renters are avoiding paying rent on their credit cards and are actively engaged in controlling those balances on their credit obligations.
As this chart shows, the downward trend started in late February and continued to fall.
Rental application volume
The number of people applying for a rental dropped in April, started to rebound in May and has come back up to pre-COVID-19 volume in June compared to January and February of this year. Although overall volume is still down for the summer months.
What does the future hold?
As multifamily trends continue to evolve, it’s difficult to predict what will happen next. The TransUnion monthly reports shed light on the previous month and helps multifamily navigate through these difficult times.