Last Monday, Punxsutawney Phil emerged to find a long shadow and forecast more cold weather.
Sound familiar?
This season, it doesn’t take a groundhog to tell a landlord that the housing market is in for a long winter.
Don’t get me wrong, the last months of the year through January are always an off-season for landlords. The resident-screening company where I work processes a high volume of applications to rent, and traditionally we see a decline in traffic of over 15 percent during this season. But this year the seasonal slump is far more pronounced. In fact, it’s unprecedented.
But should you say yes?
Even worse, the decline in apartment seekers is only half the story: Renter quality is also at a low during the winter months – as the old saying goes, the only reason people move during Christmas or New Years is because they need to. Simply put, no one who isn’t running from someone will voluntarily relocate their household during both the dead of winter and the most stressful of all holiday seasons.
And this past year was much worse than usual. I compared the pool of rental applicants from the end of 2008 with the end of 2007 to see the difference in the number of consumers who’d had
serious problems paying the rent – they either had been evicted or left a landlord owing money.
The figures are startling.
Compared to a year prior:
- 22.9% more had problems in the third quarter
- 31.8% more had problems in the fourth quarter
- 38.4% more had problems in January 2009
There’s no use mincing words: 2009 will be a challenging year for real estate. It could be a devastating one. Whether we can expect light at the end of the tunnel in 2010 is anyone’s guess. And bear in mind, I’m not even factoring in credit scores or mortgage foreclosures to the picture.
That crunch you hear…
Speaking of credit scores, during this same period, as banks turned on each other and some of them have now since expired, they also turned on consumers. The effect has been striking. I’m sure you know it’s now next to impossible to get a mortgage, but you may not realize:
This is largely uncharted territory for the screening industry; it’s vital for landlords, as users of credit information, to understand what goes into the “score” – it’s often not what you think.
Nice to meet you
I know… Quite a way to begin the inaugural NAA Blog.
So what’s the upside for multifamily property owners and managers to a global economic downturn? Is there any room for optimism? The good news is that it’s a great time to explore emerging technologies that will give your assets a crucial edge on the competition, and to identify bad practices that you could get away with during a bull market but are deadly to your business in a dip.
First things first:
In times of crisis, focus on the things you can control. Apartment management firms can’t control unemployment rates, credit markets or stock prices. The market makes you – not the other way around. This is not to say you can’t fight for a competitive edge (and I don’t just mean offering concessions, but more on that later).
Fortunately, you do have tremendous control over how you trim budgets, invest in the best people and – now more than ever – utilize technology to drive operational efficiency and cost savings, not to mention deliver your communities that edge in the marketplace.
What’s more, in the
words of Tom Shelton, industry veteran and former NAA big-shot: “Generally speaking, softer economic conditions in the apartment market generally create opportunities for well-positioned management companies.”
Now we’re talking!
Stay tuned for strategies and leasing trends that will help you weather the storm.
Jake Harrington - Business Development, On-Site.com