It’s human nature to want answers to the things we can’t explain, answers to the questions we simply can’t answer. The effects of the Coronavirus on Landlords and tenants remains at the forefront of the minds of each alike.
In such unsure times due to Covid 19, every industry and industry specific consumer wants to know how this is ultimately going to affect them. In the world of real estate, there’s a lot of scared property owners, landlords, and tenants alike.
With unemployment at record lows, a surging economy, and a record breaking stock market just a short time ago, it’s truly sobering how fast things can change. Especially when the culprit is only 20 nanometers long and wreaks such havoc.
Over the last four decades, our firm has been through multiple crises. Housing crash of 2008, countless hurricanes, 9/11, etc. In every instance, things recover, and eventually get back to normal. But, is that the case here? Likely so. The questions remains to what extent and how bad will the damage be?
Tenant’s Ability to Pay Rent
Of course, region will play a huge roll in the direct effects on tenants. Comparing an epicenter like NY with over 149,000 cases at the time of this article, to Wyoming with 230 cases will have different outcomes in the total devastation of the Coronavirus.
Jen Thompson, an employee at Douglas Realty dealing with tenants on a daily basis says, ” The tenants are worried about how this is going to affect their ability to make income, pay bills, and feed their families. I spoke with one tenant who said she dipped into her 401K to be able to pay her bills for now, because her work has closed indefinitely.
Of course, tenants losing jobs or enduring financial hardship isn’t something out of the ordinary. The question now is how many more than normal are we about going to see?
“This is something that none of us have experienced before. I believe that April will be rough but May will be worse” Donna Allan says, one of the property managers at Douglas Realty with almost 20 years experience in the business, . “It’s going to be a bumpy ride but we will all work through this and come out in the end alright.”
So far, April has been relatively normal for tenants in Douglas Realty’s properties. Currently, as of April 10th, the total number of unpaid dollars towards rent is $89,000 where typically at this time of the month $65,000 is the average. The vast majority of tenants seem unaffected to the point they can’t make their payments. The big question is if this means few have lost their jobs due to the outbreak, or if it is simply families dipping into savings or financial resources to stay afloat.
“Our tenants that cannot pay rent are not bad people, they are just in the same boat as the rest of us, the difference is who lives week to week, and who has a month of funds as a back up” Allan says.
With all of this happening so fast, there doesn’t seem to be any real clear answers on available economic aid and programs from the government and the speed at which they’ll become available. While most tenants here fall into the income category that will qualify for the $1,200 stimulus check, most are concerned that this doesn’t even cover a full months rent for South Florida’s average monthly rent price tag. While it certainly will help, the uncertainty of the length of time and total impact this will have is scary for most Americans.
With SBA loans becoming available, most are hoping that payroll can remain in tact for workers, so there won’t be any lapse in their ability to keep an income stream until things die down and normal out again.
In other parts of the US, groups are organizing to form rent strikes, like the group “Rent Strike 2020”. Over a million and a half people have signed the petition demanding every state allow a two month rent, mortgage, and utility freeze so both landlord and tenants get a break while things hopefully settle down.
In most cases, it seems these movements are taking place in crowded cities with large apartment buildings where the affects seem to be more potent.
Although some tenants are reporting landlords being lenient and helping where they can if they’ve been affected by the Coronavirus outbreak, others have shared emails from their large apartment management services demanding payments still be made on the 1st. And in some cases, are lying about what the laws are.
In LA, tenant Simona Boneva reported her landlord company responded to her job loss by saying they were entitled to the government stimulus check she was to receive, and needed to sign an agreement on repayments once the government mandated shutdown ends. Neither of which is true. Currently, the new law for LA states tenants would have up to a year to repay back rent.
Some have pointed out the eviction moratorium that has been put into place to help offer some protection to tenants, but most see it as a band-aid, if that. What happens when the period ends? Will landlords simply evict the non paying tenants when the order ends?
The LA Times reports, “there is a nationwide eviction moratorium for nonpayment of rent, but only for renters whose landlords have mortgages backed by the federal government — something most tenants don’t know and would have a difficult time figuring out.”
Unfortunately, there seems to be mass confusion as this has been such a sudden shock to the system. People are just unsure of what they should be doing.
Landlords Needing Reprieve
Landlords right now have some light at the end of the tunnel, even if it’s dim.
Mark Calabria who is with the Federal Housing Finance Agency says, “talk to your landlord first. If your landlord can call the lender and has a Fannie and Freddie loan and says, OK, I can’t make the mortgage because I can’t collect rent from my tenant, then the landlord can get forbearance. And of course, part of that agreement would be that they’re passing along the forbearance to the renter.”
For individually owned properties, like mostly what our firm deals with here in South Florida, this may be a nice break for landlords and tenants alike.
However, it’s important to note this is a forbearance, meaning it will need to be paid back, meaning tenants and landlords should try and work agreements that are fair and work for each other.
Many auto lien holders, credit card companies, auto insurance, utility companies, etc are all pitching in to help. Perhaps some lessons have been learned in the 2008 recession where lenders were slow or reluctant to help alleviate payments. What were seeing now is unprecedented.
Go to aba.com and search for “Industry Responds to the Coronavirus” to see what relief institutions are offering.
Property Management Industry
Not only are tenants and landlords experiencing confusion and worry with the current situation, so are most management services, including ours.
Douglas Realty owner, Kevin Haag says, “We’ve been through many hurdles in the last four decades of business, but this is something very different. It’s not like a hurricane where we’ve seen it before and can predict the aftermath and what’s involved with that. Right now, we’re trying to keep calm and help wherever we can.”
Currently, we are staying on top of programs and the situation to help and offer advice where we can.
Our advice has been to simply pay rent if you can, if you’ve lost your job or are experiencing financial hardship, simply tell us and we will work with your landlord to see what options are available.
“So far, the response from our tenants and owners has been impressive. In the midst of such horrible times, we’ve received nothing but praise from tenants and owners. Both are happy we are here and willing to help and offer advice and solutions that aren’t so black and white” Haag explained.
The offices are currently locked up and closed to the public, even as real estate has been deemed an essential business. All signing has been moved to docusign, an electronic online signing service. Payments are made online or dropped in the physical dropbox outside the office.
Kevin says, “We’re really pleased with how well our staff is handling this. Agents are asked to work from home while the skeleton crew remains at the physical locations. Our property owners shouldn’t even notice a difference in our operation, as many of them are not here locally. It’s the beauty of the modern age and internet. But, I’m really proud of our staff and the dedication they are showing.”
Mike, an owner with Douglas with 20+ rental properties says “I have been dealing with [the] Lehigh [office] and I have nothing but praise for the way your staff is working…in summary, I am pleased at this point. Keep up the good work.”
Agents showings rentals have been asked to arrive to properties early, sanitize surfaces, then remain in their vehicle while applicants look inside. Applications are then done online, where app fees are also paid.
“Rental leads seem to be remaining steady as people are still out looking for rental homes” Winter says, a leasing agent at Douglas Realty. “We still get over 20 a day of people interested in our vacant homes”.
Vacancies still remain low, and perhaps will remain low as some experts are thinking tenants are more likely to renew in this time period so they won’t have to deal with the hassle of moving in such uncertain times. This may be a plus for most landlords.
General Real Estate Market
In short, things are not great in the Real Estate market. Showings have virtually come to a stand still, properties have been pulled off the market, and there is a lot of uncertainty surrounding the current market landscape.
A local appraiser in Ft Myers has given some insightful data who refers to the current market situation as “a pause”.
Pending sales in March were down by 31% from March 2019.
· Looking at March 15-31 alone, pending sales dropped 49% from March 2019.
· From March 15 through April 5, there have been 883 real estate listings withdrawn. That’s an 88% increase from the same time frame in 2019.
· There were 2,073 sales closed from March 16 to March 31. That’s up 22% over last year, but not surprising to Simmons given that most of those transactions were negotiated prior to mid-March.
· When compared to the same three-week period last year, new listings are down 36% since March 15.
Unfortunately, no one is an expert on this. There’s no real clear answer on when this will end, or what toll it will take. But, the one thing that’s clear right now, is a lot of people don’t want to be looking at houses.
But, for investors, this could be a nice time to pick up properties at a discounted price if a seller is wanting to dump something quickly.
At the end of the last recession, we were told there would be 14 years of inventory of property, which ended up getting bought up in just a matter of a couple years, and the market recovered nicely. So, we’re not too worried.
For now, we’ll simply have to wait and see. We believe once the stay at home orders are lifted, showings should get back to somewhat normal.
In the coming weeks, we will be updating more and more as information becomes available. It’s important everyone stays calm and willing to work with each other.
For all things Property Management, Douglas Realty is here for you!