As we navigate this time of unparalleled change and uncertainty, Capitaliza Corp. will continue to prioritize health and safety while remaining dedicated to our essential task of helping and motivating our clients by providing access to better knowledge about Southeast Multifamily scenario. While our team is taking aggressive steps to provide our clients with the tools they need to navigate these uncertain times, it is still early to identify concrete patterns.
The influx of coronavirus knowledge can be paralyzing, and the economic prospects are highly unpredictable for both financial and health systems in the global crisis. To limit long-term damage and achieve a quicker recovery, by taking dramatic steps, the government is facing an unprecedented situation. The time has come to establish a calculated answer to this situation.
Supply & Demand
Supply remains stable due to a decrease in turnover. During the last 3 weeks, demand has dropped by around 30 percent. We are awaiting new details on the results in April. National Multifamily Housing Council (NMHC) monitors the payments regularly. Southeast is one of the least affected areas, except for Miami and Orlando as tourist hubs.
According to the U.S. Bureau of Labor Statistics, in March the unemployment rate increased by 0.9 percentage point to 4.4 percent. This is the largest over-the-month increase in the rate since January 1975, when the increase was also 0.9 percentage point. The number of unemployed persons rose among all major worker groups by 1.4 million to 7.1 million in March. The Employment Situation for April is scheduled to be released on Friday, May 8, 2020, at 8:30 a.m. (EDT).
Short-Term / Long-Term Perspectives
It’s hard to tell how long the effect would be because of the unknowns about the length and magnitude of the spread of the disease. This results in delays in leasing and investment decisions, as well as a decrease of demand as short- cost-cutting, will overshadow long-term planning. According to Brad Hunter, Forbes’ Real Estate contributor, “The impact of the economic disruption in real estate varies, and is going to continue to vary, from one state or metro area to another.”
In the short term, let’s say April–May, we assume the effective rent will be affected by job losses across the country, while property owners will ask for forbearance from their lenders too. This stems from delays in leasing and investment as well as moderating demand as short-term cost reduction will overshadow long-term planning, also taking into account that the outbreak peak is estimated by the end of Apr-May.
The long-term outlook remains unclear until we have a clear picture of the next few months, which could present a significant challenge to trade, income, employment and, eventually, real estate. The downturn length would be the main determinant of how long the real estate markets are suffering, and how.
What is Capitaliza Corp. doing?
We are collecting information, projections, estimates, etc., from the most reliable and knowledgeable in the industry to come up with creative real estate solutions to help lessen the impact. At the same time, we remain in constant communication with our Property Management company to stay informed about the health and work status of the tenants, protocols, social distancing, sanitizing the apartments and common areas, etc.
We also keep our investors informed about the status of the properties and decision making of the board in regards to the outbreak, and the strategies to implement. As part of the solution, lenders are a very important piece of the puzzle, we keep them engaged to differ payment for 60 days, if necessary.
However, as happened at the bottom of the housing crisis, long-term real estate buyers will find opportunities to pick up properties at distressed costs, and lower than any of us have seen in our careers. While the situation progresses, Capitaliza Corp. is looking forward to industry-wide approaches which are ventures to be reshaped from a long-term perspective. We firmly believe the coronavirus began this crisis, and the coronavirus will end it.
Stay home, stay safe!