What will happen to the rental market due to COVID-19?
Many rental property owners and those contemplating entering the rental market are now anxious about what will happen to the rental market – rent values, rent collection, etc. The truth is, the current COVID-19 pandemic is uncharted territory for most real estate professionals. We are constantly hearing about fluctuations in the stock market, unemployment reports and stimulus benefits. We are also learning that evictions are on hold and late fees can’t be charged (at least here in Nevada).
But what will this ultimately mean for the real estate market? Specifically the rental market?
The measures being taken by government officials to put evictions on hold and not charge late fees clearly indicates that the goal is to maintain relative stability for folks. To be able to get through this pandemic with as as little interruption as possible. On the flip side, many mortgage companies are offering relief to homeowners who can’t make their mortgage payments rather than charging them late fees and initiating foreclosure proceedings. Stimulus benefits and supplemental funding of unemployment benefits are intended to carry folks through this period of time as well. It appears that the plan and hope is that once the pandemic passes and things begin to resume to the way they were previously the economy can rebound without having the added stress of an untold number of evictions and foreclosures, which would be detrimental to the real estate and rental market.
In the end, it really depends on how long the shut down will go on for. That will indicate what we can expect with rental and sale values and demand; whether or not folks will be able to maintain relative stability during this time and once things pick back up again resume their lives without too much loss and have jobs to get back to. In that case, we hope that the market will prove overall stable. However, if we have long term closures, lack of benefits or other unforeseeable repercussions, we may have a different market to prepare for.
It does appear, though, that the ultimate and overall goal right now is to keep people status quo to prevent major shifts in the real estate market so that once an economic rebound occurs, the market can continue to grow and thrive.
How does this affect tenants?
There are provisions for tenants who land on hard times and only able to pay partial rent, such as waived late fees and postponement of evictions, which were authorized by government officials. Additionally, many homeowners are willing to assist tenants during this time. However, rent forgiveness is not obligatory. Assistance may come in the form of rent postponement. This means that eventually the postponed rent will still be due. Thus, if a tenant can afford rent because their job has not been affected or has the means to pay rent, it would be in the tenants best interest to continue making their rent payment. Many homeowners have mortgages on their rental properties and so, a lack of rent means that they may have to resort to other means for payment or qualify for assistance from their mortgage company. Additionally, many homeowners may have also lost their jobs.
Ultimately, predicting what exactly will happen is dependent on many factors. Unfortunately, at this time, it is hard to say with any certainty what will happen. We hope that this situation will be temporary and everyone can find financial stability sooner than later and we can get back to having a thriving real estate market.
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