The Weekly Briefing - September 21st, 2020

The Weekly Briefing – September 21st, 2020

In This Week’s Brief:

  • Apartment Occupancy Rates Largely Holding Steady Despite Some Young Adults Moving Home
  • Pandemic Likely Reinforcing Preexisting Disparities in Housing Insecurity
  • Retail Sales Continue to Mark Steady Gains
  • Reporting Errors and Scammers Inflated California’s Unemployment Claim Figures

Apartment Occupancy Rates Largely Holding Steady Despite Some Young Adults Moving Home

Multifamily occupancy rates continue to demonstrate resilience as absorption has largely kept pace with deliveries despite difficulties surrounding in-person unit tours amidst a pandemic. RealPage reports that the nationwide occupancy rate inched upward last month to 95.7% and now stands only 60 basis points below figures from August 2019 when occupancy rates neared all-time highs. RealPage also notes that apartment demand in August surpassed year-prior figures in most non-gateway metros. The steady occupancy figure comes despite indications that some young adults, an important source of multifamily demand in recent years, have moved in with family members in recent months. Pew Research Center analysis indicates that 52% of 18- to 29-year-olds now live with their parents, a five percentage-point increase since February. Our analysis of Current Population Survey IPUMS data shows that part-time students have been the most likely segment of young adults to move home, but this trend could unwind fairly quickly once colleges and universities resume regular in-person instruction. In contrast, many non-students, a group that includes both employed and unemployed workers, who have moved home are likely to stay there until they see improved opportunities in the labor market.

Percentage Point Increase in Young Adults (18-29) Living at Home Relative to August 2019

Pandemic Likely Reinforcing Preexisting Disparities in Housing Insecurity

The pandemic’s uneven impact across economic sectors is likely contributing to housing insecurity among traditionally disadvantaged groups. An estimated 16.6 million adults nationwide have fallen behind on their housing payments, according to the most recent Household Pulse Survey, which covers a broad cross section of U.S. adults. Approximately 8.2 million renters have fallen behind, and overall renters are 2.3 times more likely than homeowners to be behind on their housing payments. Job losses and hour reductions, which have taken a heavier toll on low-wage industries, appear to be key contributing factors for households facing increased housing insecurity. Adults living in households that have lost employment income since mid-March account for nearly three-quarters of those not current on their housing payments. Consequently, many disadvantaged groups now find themselves at greater risk of housing insecurity. Both lower-income households and minorities are more than twice as likely to owe back payments on their housing. Adults with less education and households with children are also more likely to have fallen behind.

Share of Adults Not Current on Housing Payments

Retail Sales Continue to Mark Steady Gains

U.S. retail and food services sales rose 0.6% during August compared to a month prior and are now up 2.4% YOY. The headline growth retail sales figure, which covers approximately one-quarter of all consumer spending, has slowed for three consecutive months. But the modest deceleration provides little reason for concern given that retail spending already recovered to the pre-pandemic baseline this summer, leaving less room for improvement. Sector-specific figures, however, are more likely to see more sizeable gains (or declines) in the coming months as reshuffled shopping habits have yet to return to pre-COVID patterns. For example, spending at both clothing stores and food services places still falls short of recovery as the sectors are down 20.4% YOY and 15.4% YOY respectively. In contrast, both the home building supply and sporting goods sectors may be positioned for a step back in coming months after surging since the start of the pandemic.

Year-on-year Change in Retail Spending by Business Type

Reporting Errors and Scammers Inflated California’s Unemployment Claim Figures

The California Department of Labor clarified last week that data reporting discrepancies and a surge in fraudulent applications drove the recent spike in Pandemic Unemployment Assistance (PUA) claims that the Bridge Research Team noted in last week’s Brief. The state’s labor agency says it is paying PUA benefits, which temporarily support self-employed, freelance, and independent workers, to 1.8 million people, a fraction of the 6.4 million Californians reported in federal figures. The cause of the inconsistent numbers is not entirely clear. Falsified applications also led to significant overstatements of California’s PUA figures. The number of new PUA claims in the state doubled over a period of two to three weeks even though other states had not seen a similar surge in filings. After the state labor agency implemented measures to counter fraudulent filings, however, the number of new claims dropped more than 72%.

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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