New research shows some interesting trends in relocation.
Pew Research reviewed U.S. Postal Service data and found that 15.9 million people moved from February to July 2020. Some 28% said they did so because of fears of exposure to COVID-19; 20% said they moved to be closer to their families or returned home because their college campuses were closed (23%). Some 18% said they moved due to financial issues or job losses.
Other findings in the study indicated that while permanent moves were up 4%, temporary moves were up 27%—a further indication that some of the homebuying spree might be those buying second homes and moving for an indefinite period, but not making a permanent decision yet.
The data point that caught our attention was that over 110,000 people had moved out of Manhattan, a 500% increase over the prior year. Among other cities cited with similar levels of outward movement were Chicago, Los Angeles and, surprisingly, Naples, Florida.
Are these changes temporary or more permanent? And how will this affect the economies of the urban core housing markets and the suburban markets over the next year? Some industry leaders think 2021 will be repeat of 2020 in terms of total housing sales. The truth is no one really knows
Danger in the Rental Market
According to the Federal Reserve Bank of Philadelphia, outstanding rent debt from deferred payments will reach $7.2 billion before the end of 2020. Another estimate from Moody’s Analytics forecasts that 12.8 million Americans would owe an average of $5,400 for a total of nearly $70 billion in rent debt. The article said that while the dollar value of the debt cliff is far less than the trillions of dollars of mortgage debt that exploded in 2007-2009, the numbers of people affected is far higher.
Astute observers of the overall housing market, not just homeowners, but the whole market, can only wonder how Americans are going to fix this situation without a robust economic recovery—which now seems doubtful with the re-emergence of COVID-19 cases. How will problems in the rental market affect the owned and occupied segment?
The other issue that has been overlooked is the impact on investor-owned housing, particularly the small owners or single-family residential for rent. We know from our past studies that there are an estimated 7 to 8 million single-family homes owned by investors that are being rented. Many are owned by investors that own one or two properties. Many of these have mortgage debt on their investments. What impact will this have on the small investor owner should the forbearance continue? How will this affect their cash flows and debt service?