APARTMENT STOCKS SLIDE

In March, when the lockdowns began, we continually have warned Trends Journal subscribers of the sharp commercial and apartment rental decline that would follow shelter-in-place rules, which shut down cities and states across the nation and around the world.

Shares of the FTSE Nareit Equity Apartments Index, which follows stocks of publicly-traded apartment owners, have lost 20 percent of their value so far this year.

Landlords are doubly squeezed: vacancy rates are up in key markets such as San Francisco and New York City, where vacancies have hit a record this year, and major landlords such as Equity Residential and AvalonBay Communities have to offer free months’ rent and lower prices – by an average of 15 percent in New York last month, compared to August 2019 – to lure tenants, according to the Wall Street Journal.

San Francisco’s rental rates were down 9 percent in August, compared to a year previous, and 6 percent in the suburbs as people able to work from home fled to cheaper housing markets.

Lower rents, higher vacancies, and the Trump-mandated ban on evictions leaves many landlords, especially smaller ones, without cash needed to pay mortgages and property taxes.

TREND FORECAST: With governments imposing eviction restrictions on landlords who have been unable to collect rent from many tenants since October, plus the loss of rentals from people moving to suburban and exurban areas, the economic decline will push apartment owners, big and small, into insolvency.

And as they did when they bought up foreclosed homes by the thousands, hedge funds and private equity groups will gobble up foreclosed apartment buildings and add them to their multi-billion dollar portfolios.