Apartment rent collections in Houston, Texas for April, 2020 are tracking just below expectations, at about 90 to 95% of the rental collections expected Pre-Covid. This was received favorably as some owners were forecasting delinquency rates of 50%. Owners were concerned the delinquencies would be much higher due to government limits on evictions. Most owners expected delinquencies in excess of 10%.
Apartment owners are broadly concerned about collections for May 2020. Will delinquencies rise or fall? Will owners use the checks from the government to pay for rent? Will tenants use the government checks for an unrelated purpose if they can live in place for two to three months without concern of eviction.
Perhaps I’m naïve, but I believe most people will do what is right. Tenants not paying rent appear to be in dire straits. They have lost jobs or incurred other hard times. It does not seem the rent defaults are strategic designed to game the system. There will be a few of these; however, most citizens are ready to get back to work.
Today’s jobless report was 6.6 unemployment claims, bringing the total unemployment claims to 16 million. Sixteen million unemployment claims in 3 weeks is unprecedented. It has never occurred before. Unemployment claims are likely to total 30 to 50 million before stabilizing.
Massive unemployment is the real risk to apartment owners. If apartment occupancy falls and apartment owners default on mortgages, it will be because the country lost 30 to 50 million jobs.
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