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Monday, August 10, 2020
Flooding resulting from Hurricane Harvey in Houston, Texas. Harriet Taylor | CNBC Nothing can compare to the crushing economic tsunami created by the coronavirus pandemic, but in the housing market specifically, there are some parallels to natural disasters. Lessons learned from those devastating events are helping the industry cope now. In 2017, after Hurricane Harvey devastated Houston, thousands of homes were damaged or destroyed. Many of those were single-family rental homes owned by one of the nation's largest rental REITs, American Homes 4 Rent. With about half of its 3,200 homes damaged, several hundred severely, and some of its staff unable to get to their offices, the company had to mobilize quickly, remotely. Thanks to its national scale and online platforms for payment and maintenance, the company was able to relocate tenants and modify rental agreements for those who could no longer make their monthly payments. "The fact that we have gone through Harvey and other hurricanes, having to close our home office meant that the ability to work from home and provide service to residents was something we already had a blueprint for," said David Singelyn, CEO of American Homes 4 Rent. The coronavirus pandemic is of course hitting on a much larger, national scale, but some of the same rules apply. The rental REIT, along with others like Invitation Homes, which owns thousands of single-family rental homes across the nation, is working with tenants on an individual basis, offering repayment plans and changing lease terms. "We're not going to evict anyone," said Singelyn. In April, the company received about 95% of it normal rental payments, but Singelyn expects the numbers to fall more sharply in the coming months, as more tenants experience financial hardship. The same is true at Invitation Homes, the largest single-family rental REIT, with 80,000 properties across 16 major housing markets. It is also taking lessons learned in the past and applying them to today. Fires and hurricanes "We've done this across hurricanes in Texas and Florida, fires in Northern California, so we have a process to work with residents," said Dallas Tanner, CEO of Invitation Homes. "We've established these programs over time that can help families in times of need." In the multifamily market, rent payments in mid-April were still made at 93% the rate of the previous month, according to the National Multifamily Housing Council. For both single-and multifamily nationwide, rent payments received by property managers and landlords as of April 8 were 17% lower than the same period in March, according to Rentec Direct, a property management software company. Consumers are starting to receive checks from the government's stimulus program, but they may not be using that money to pay the rent. Less than half of U.S. adults (45%) plan to prioritize housing as an expense to continue paying during the coronavirus crisis, according to a survey conducted by The Harris Poll in April and commissioned by Tally, an automated debt management app. Groceries and utilities ranked higher on the priority list. Camden Property Trust, a Houston-based multifamily REIT which also weathered the effects of Hurricane Harvey on many of its properties, established a $5 million resident relief fund for those experiencing financial losses from the pandemic. It provides up to $2,000 per apartment for financial assistance for living expenses such as food, utilities, medical expenses, insurance, childcare or transportation. "We believe it is still too early to quantify the impact of the COVID-19 pandemic to our financial performance," said Richard J. Campo, Camden's CEO. "Currently our portfolio's occupancy remains strong at over 96%. We are seeing high levels of resident retention but also reduced foot traffic and new lease applications from prospective residents given the current environment." The program received more than 2,500 applications in the first 16 minutes it went live and then had to shut down the site after reaching the $5 million mark, according to a company spokesman. They cut checks for more than 500 tenants the first day. The numbers will get worse There is no question the numbers will only get worse for the rental market over the coming months. That's why both Tanner and Singelyn are part of a daily industry effort lobbying Congress and the administration for help. "We need to make sure that we're helping our residents in time of need, and at the same time we have to be careful," said Tanner. "If we put too much pressure on landlords, we have obligations as well, such as credit facilities and property taxes, that we pay back into the system, so it's a delicate balance. We'll do our part, but we need the government to step up and also help renters in this time of crisis." Tanner said the industry has put forth a proposal to the U.S. Treasury and the Department of Housing and Urban Development for short-term liquidity relief, designed much like a long-term, interest-free loan administered through the tax system.   "Everything is a long term negotiation. I see progress at times, and I see frustration at times. It is very much a political process," said Singelyn. "One thing that's encouraging is that both sides have indicated they want to see rental relief and housing relief."
A view of an apartment building in the Chelsea neighborhood of Manhattan, New York City.  Drew Angerer | Getty Images As job losses and unemployment continue to increase as a result of the coronavirus pandemic, more than half of Americans who rent their residence say they lack confidence they will be able to pay May rent in full. That's according to a new survey that finds 12% of renters do not expect to pay rent at all during May; 15% expect to pay partial rent in May. Another 21% said they don't know yet. The percentage saying they are confident they will have the funds for full rent (52%) was lower than the 69% who said they could pay April's rent. Income losses related to Covid-19 have hit 63% of renters across the nation, with 48% describing the losses as "devastating." Four in 10 renters said they plan to move in the next six months, according to the survey, which was conducted April 10–16 among 20,000 Americans by Apartments.com and Grace Hill, a property management technology and education provider.  The survey's authors said at least part of the response may be attributable to federal stimulus checks reaching fewer than half of Americans by mid-April. Among those who were unsure whether they would be able to pay, 75% said they plan to use the stimulus to pay rent. Among all respondents, 60% planned to use the stimulus to pay rent. The study's authors also stated that anxiety over a potential job loss may have contributed to uncertainty about making rent.  Over 26 million have filed for unemployment since states began shutting down, with many facing layoffs during the second half of March. As April 1 approached, campaigns calling to cancel rent and mortgage payments arose due to the uncertainty many have been experiencing. The online trend, "rent strike," began along with hashtags #CancelRent, #KeepYourRent and #FoodNotRent.   Many Americans had some relief when the IRS deposited stimulus relief checks to those who were eligible the week of April 13. The CARES Act, a $2 trillion stimulus package passed by Congress, gave homeowners with federally backed loans two financial relief options, and for renters the act and many states and cities have banned evictions during the health pandemic. "This is a very overwhelming time for renters, and I think they are worried about surviving and keeping a roof over their heads," said Dru Armstrong, CEO of Grace Hill. Kellogg Business School professor Adam Waytz, who is familiar with the survey, said one thing that stood out in the data was that the people hardest hit by the coronavirus crisis were the least familiar with the CARES Act. "A significant percentage of people who said they had experienced an income loss (compared to those who did not experience an income loss) reported no familiarity with the CARES Act. I would recommend that they educate themselves and work with property management companies to get to know more about relief programs," he said. Even though evictions have been banned, some renters are still worried about late fees. 'It is all about communication' "Communication is the most important thing during this whole uncertain time. Renters need to make sure they are communicating with their property managers about their current situations," Armstrong said. "And we are telling all of the companies we are working with to practice empathy."  Armstrong said many apartment complexes are making the effort to be understanding with tenants. "People are not navigating through a tough economic issue, but a serious health crisis as well. And it is important everyone remembers that," she said. "We've changed our wording and tone in our letters to renters, and we've also implemented payment plans for those who need a little extra time," said Courtney Gordon, senior vice president at property manager Rise Residential. "Our property employees are calling renters to just check on them and make sure they are okay, because this is a stressful time."  Renters are advised to give their landlords notice if they won't be able to make rent or need to work out a payment plan. Gordon said Rise Residential has worked out various payment plans with their renters. "It is all about communication. As long as you explain to your property manager when you will be able to pay the full amount, they should understand," Armstrong said. "One of the things we are seeing is property management companies trying to keep pace with all the changes and update their policies and train their teams on what those policies are," Armstrong said. "What may have been true a month ago or even a week ago is probably not true anymore." More from Invest in You:If money is keeping you awake at night, these 5 small financial moves can ease the tensionPeople save as much as 73% more when they know this simple trickIf you think your job is on the chopping block, here's what to do Armstrong said this dynamic situation includes increase in stimulus checks hitting bank accounts which would improve renter's confidence, and the apparent flattening of curves in some places. "But we're not sure how much it would improve the situation," she added. "Our findings found tremendous confusion about federal stimulus, and renters appear to be taking an attitude of believing it when they see it." Reopenings of states across the country will also be key to the outlook. "It may lead more people to feel hopeful about their situation," Armstrong said. "We found renters want to pay their rent and don't want to fall behind if they can help it. If more certainty begins to take shape, we think that will move the numbers. ... This whole situation will continue to evolve, and reopening of certain states is the next question mark," she said. SIGN UP: Money 101 is an 8-week learning course to financial freedom, delivered weekly to your inbox. CHECK OUT: 6 reasons why you might not have received your stimulus check yet — and what you can do about it via Grow with Acorns+CNBC. Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.
Signage stands outside the Freddie Mac headquarters in McLean, Virginia, U.S.. Andrew Harrer | Bloomberg | Getty Images As the economic shutdown drags on and job losses mount, more borrowers are opting to delay their monthly mortgage payments through mortgage forbearance plans. The majority are doing it through a program designed to provide relief to holders of government-backed home loans, part of the coronavirus CARES Act relief package. Just over 3.4 million borrowers, representing 6.4% of all mortgages outstanding, are now in forbearance plans. That's an increase of 477,000 loans in just one week, or a nearly 9% jump, according to Black Knight, a mortgage data and analytics firm, which is running weekly tallies.   These forbearances represent $754 billion in unpaid principal. They include 5.6% of all loans backed by government-sponsored enterprises Fannie Mae and Freddie Mac and 8.9% of all FHA/VA loans. At the current level, mortgage servicers are required to advance $2.8 billion of principal and interest payments per month to mortgage bondholders of government-backed loans. On Wednesday, the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, announced the servicers would be bound to make these payments for 4 months. Fannie Mae usually requires payments be made for up to a year. Regardless, servicers of GSE-backed loans could still face more than $7 billion in advances, given the number of loans in forbearance thus far. Some said the move is not enough help for servicers. "While this news reduces servicers' worst case cash flow demands considerably, we continue to call on the Treasury and Federal Reserve to provide a liquidity facility to ensure that servicers can continue their important work of advancing missed payments to investors as well as paying property taxes and insurance premiums on behalf of struggling borrowers," said Bob Broeksmit, CEO of the Mortgage Bankers Association. For FHA loans, Ginnie Mae has already set up a liquidity facility to give servicers relief. Not all loans in forbearance are government-backed. About 740,000 loans either held on bank balance sheets or in private-label securities are also in forbearance plans. This represents $207 billion in unpaid principal balance. The majority of these loans are higher cost, so-called jumbo loans. The tally is expected to rise, along with job losses. Borrowers have faced only one monthly payment since the full economic shutdown.
New York City, America's largest metro economy, relies on property taxes for its revenue. But with a lot of uncertainty around residential and commercial real estate that source of money could come under pressure. CNBC's Robert Frank reports. 02:19 30 minutes ago
Home Depot shares are under pressure Tuesday after the company posted a drop in earnings tied to coronavirus-related expenses. But, even with that decline, Home Depot is still leading against major competitor Lowe's. Home Depot stock remains up 9% for the year, while Lowe's has fallen 3%. That trend of outperformance should continue, according to Nancy Tengler, chief investment officer at Laffer Tengler Investments. "We own both but we own a lot more of Home Depot and the reason is twofold. First of all, they're best in class, they have the best locations, candidly the best management team, and they've been growing the dividend in the 20% range every year for the last five years," Tengler said Monday on CNBC's "Trading Nation." "The free cash flow is healthy, well above dividend, and the online sales have been compelling at 20% or so." Home Depot's dividend yields 2.5%, above the S&P 500's roughly 2% yield. While Home Depot has outperformed Lowe's this year, it has had a slightly weaker run this quarter – it has risen 29% compared with a 37% gain for Lowe's. Ari Wald, head of technical analysis at Oppenheimer, said it should regain its lead. "We do prefer Home Depot stock. It not only has a stronger long-term trend, but we see it as the more tactical idea here," Wald said in the same segment. "If you plot a ratio of the two stocks against each other, Home Depot has actually underperformed since mid-March, and is coming into support at its 200-day moving average, suggesting we're approaching a likely turning point in the ratio." The stock is also back to all-time highs, said Wald, and should continue to move higher.   Home Depot is "currently trying to break out above its February peak of $247 so I think that's very telling when you have a stock already getting close to new cycle highs with the rest of the market so well below those peaks. That's really a great display of the relative strength in that stock," said Wald. Home Depot hit an all-time high on Monday, surpassing its February peak. It is now 3% below that record. Disclosure: Laffer Tengler Investments holds LOW and HD.   Disclaimer
Squawk Box The pandemic is reshaping the workplace, which is now more flexible and remote. Owen Thomas, CEO of Boston Properties, joins "Squawk Box" to discuss whether it could have a lasting impact on the commercial real estate market. 07:20 an hour ago