Relocations + Rent Drops

By on Jul 15, 2020 in Matrix, News

Already apparent in the U.S., COVID-19 has resulted in a migration from major cities and falling rents. As the housing industry braces itself against continued impacts from the virus, will both trends continue into the third quarter? Market analysts, real estate agents and renter surveys give us clues about what to expect.

Are people really moving away from cities as a result of COVID-19?

Yes. People are leaving cities to avoid COVID-19 risks and disturbances. Though it is a misconception that population density equates to higher risk, perception matters. The perceived increase in risk has made city residents feel less safe. That fear, coupled with other disruptions, motivates relocation for those who can afford it.

Pew Research Center reports that 3% of U.S. adults moved due to the pandemic and about 6% had a member of their household relocate. Of those surveyed, 28% moved to reduce their risk of contracting the virus and 8% moved due to job loss. About 20% moved to be closer to family.

Younger people make up a unique portion of those who relocated. Roughly 9% of adults ages 18-29 relocated due to the virus. This includes 23% of respondents who were university students forced to vacate their campuses.

Even New York– the market trendsetter that has captured hearts for generations– is seeing mass movements to the nearby suburbs. Real estate agents Susan Horowitz and Monica Schwerberg explored the details in an interview with NPR.

“We are seeing 20 offers on houses. We are seeing things going 30% over the asking price. It’s kind of insane,” Horowitz said. “It is a blood sport.” She adds, “Every last bit of it is COVID-related.”

Schwerberg agrees, “In the month of April, where we typically would get maybe 75 inquiries in a month, we had over 400 inquiries.”

People who once loved the city atmosphere are seeking locations with less population density, which is falsely assumed to correlate with increased infection risks. Additionally, many breadwinners are now working from home. Remote work opportunities have made commute times less of a factor in housing decisions.

Since March 2020, about 10,000 New Yorkers filed for address changes to the state of Connecticut alone, reports Hearst Connecticut Media. Nationwide, U.S. Postal Service data indicates that southern Florida and southern California are popular relocation destinations.

Who is moving during COVID-19?

While some people are relocating due to job loss and financial difficulty, there is a correlation between job security, higher incomes and relocation. In short, households with higher incomes can afford to sell their current home (potentially at a loss) or terminate a lease early in favor of getting a new home in the suburbs.

Higher income households are also more likely to have remote work. The ability to maintain income while working from anywhere permits the flexibility needed to relocate during the pandemic.

Additionally, higher income households represent the demographic most likely to own a vacation home. About 13% of those who relocated moved into their second home or vacation home, reports the Pew survey.

How does COVID-19 relocation impact the rental market?

Yardi Matrix analyzed asset performance data from 107 major metropolitan areas between April and May 2020. During that time, multifamily rents declined by .4% nationwide. Overall, twice as many markets witnessed rents decline than rents rise.

“Multifamily’s nearly decade long run of healthy performance increases came to an abrupt and unexpected end this year,” said Jeff Adler, vice president of Yardi Matrix. “Job losses have been particularly high among apartment renters, and simply collecting rents and maintaining occupancy is a new area of focus for owners and managers.”

The report suggests that the pandemic’s influence on work conditions, public health metrics and social trends will continue to impact the housing marketing for the next several years.

“If renters decide to eschew urban apartments for a more distanced standard of life in the suburbs or smaller cities, multifamily could be in for a prolonged pain period,” states the report.

Get the latest insights from the Yardi Matrix special multifamily report.