The Weekly Briefing - March 1st, 2021

The Weekly Briefing – March 1st, 2021

In This Week’s Brief:

  • Rent Collections Continue on Pace for Apartment, Industrial, and Office Properties
  • Consumers Appear to be Holding onto Stimulus Payments for Now
  • Buyer Composition Largely Unchanged During 2020 Housing Surge

Rent Collections Continue on Pace for Apartment, Industrial, and Office Properties

Data collected by NCREIF on 41 open-ended equity funds suggests continued durability of the apartment, industrial, and office sectors amid the pandemic and economic downturn. The three property types have seen stability in on-time rent collections of 92% to 93% on average each month since the middle of last year after experiencing a dip in payments during spring 2020. Another three to four percent of rent has typically been paid one month late, pushing total collections to 96% to 97%.

The retail sector has made substantial gains since spring 2020, but there is room for improvement. On-time collections at retail properties have substantially improved but have plateaued since late 2020 at approximately 80%. These gains are meaningful as on-time rent collections plummeted below 40% in April and May 2020 when many non-essential merchandisers temporarily closed their doors due to COVID-related government restrictions.

Percentage of Rent Collected in Month It is Due

Consumers Appear to be Holding onto Stimulus Payments for Now

Personal income spiked 10.0% to $21.5 trillion during January as the second round of stimulus checks poured into personal bank accounts. Government transfers to individuals shot up 52.0% in January compared to the previous month.

Instead of injecting stimulus dollars into the economy, many consumers have chosen to set aside the extra cash as savings for now, limiting the immediate impact of the stimulus package for the broader recovery. The savings rate jumped seven percentage points to 20.5%, nearly triple the pre-pandemic average. At the same time, personal expenditures rose by only 2.4% in January after two consecutive months of declines.

The additional savings could translate into extra spending power that could strengthen the recovery later this year if consumer sentiment improves. Over the past year, personal income and consumer spending have followed meaningfully different paths. Total personal income rose 6.1% YOY during 2020 in the face of broad labor market disruption. But consumer spending fell 2.7% YOY as households continue to harbor concerns about their financial situation as well as the broader economic outlook.

Monthly Personal Income & Consumer Spending

Buyer Composition Largely Unchanged During 2020 Housing Surge

The pool of homebuyers receiving Fannie Mae-backed mortgages largely held steady last year amid record-low mortgage rates, rapid price gains, and shifting consumer preferences for suburban areas. First-time homebuyers’ share of Fannie Mae purchase mortgages inched up 90 basis points to 44.8% through the first three quarters of 2020 as both first timers and upgraders saw mortgage originations climb approximately 9.0% compared to the same period in 2019.

But banks appear to have tightened underwriting standards. The share of Fannie Mae-backed purchase mortgages issued to borrowers with credit scores below 720 dipped 3.3 percentage points to 21.8%.

As interest rates continue to tick up, it will be interesting to see the long-term effect on housing demand as we enter the spring selling season. The average interest rate for a 30-year fixed-rate mortgage has increased 30 basis points since the start of the year to 2.97%, according to Freddie Mac. The Mortgage Bankers Association noted that mortgage applications decreased 11.4 percent from the prior week, citing the rising benchmark 30-year fixed rate as well as severe weather in Texas, the latter resulting in a 40 percent drop in purchase and refinance applications in that state last week.

Fannie Mae Purchase Mortgage Originations & First-Time Buyer Share


Disclosures and Disclaimers
This is a general analysis of the real estate market prepared by Bridge Investment Group LLC (“Bridge”) and is not related to any specific products or services of Bridge or any affiliate. Sources for statistics and other factual data included herein are maintained by Bridge Research. Such data has not been verified by Bridge and we can give no assurance that it is accurate or complete. Statements contained herein that are nonfactual constitute opinions of Bridge, which are subject to change. Financial projections contained herein are estimates only and are based on assumptions, including assumptions regarding future rent growth, the availability and cost of financing, changes in market capitalization rates, and various micro- and macro-economic trends. No assurance can be given that either the projections or the assumptions will prove to be accurate. Investment in real estate involves substantial risk of loss.
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