Real Estate Report: October 7, 2020

Richard Adiansingh

Rising home prices, declining delinquencies, and decreasing rents are the top three categories of this week's real estate market.

  1. Rising home prices: This doesn't span across the board since certain cities, primarily the densest cities in America, are experiencing massive outward migration while other cities, primarily tier-two cities, are accepting hordes of people every day. But the decreasing cost of money due to low interest rates and the shrinking supply of properties for sale is causing an inflationary period to spark up. So many people have the new ability to buy their first home, maybe second, yet so few properties are on the market.
  2. Declining delinquencies: This is a bit of a stretch but still a fact—the delinquency rate amongst borrowers has decreased 0.03% since August, now down to 6.88%. Is this a positive signal or a coincidence? That's rather hard to determine since unemployment is down to 7.9% from 8.4% last month (obviously good) while many real estate analysts predict that we have yet to actual reach a peak in delinquencies. Black Knight Data & Analytics, for example, suggests that "the three-month average rate of improvement since May’s peak in mortgage delinquencies suggests a longer recovery timeline" than the typical 19-month recovery that we have experienced in historical recessions. This could be the result of potentially a million loans that are still behind on payments. But the change mentioned above is too small to make any solid predictions at the moment, so for now, let's view this situation as a win.
  3. Decreasing rents: For those of you who rent in large cities, you'll understand this more than most people. Rent is shrinking like crazy, especially with professionally managed buildings; you know, the ones with hundreds of people sharing elevators, common spaces, and amenities. Large scale landlords are seemingly in a war right now to win over the decreasing number of renters in the market as more people buy homes, move to new cities, and even move back into their childhood homes with their family. The median 1-bedroom rent prices decreased 12.7% in large cities while that number grew 2.2.% in the cheapest American cities, though down from 4.8% in August. The shifting national demographics are turning average cities into hubs and hubs into ghost towns. But regardless of the region, rents are in a downturn which is great for renters and bad for landlords. We expect this trend to increase as the trends listed above continue to thrive.
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