Apartment Market Update from our Operators
JKAM received this apartment market update to pass onto our investors from an operator in our network. JKAM offerings are spread amongst a diverse array of experienced operators that are established in their markets.
As things are evolving rapidly, I am pleased to share a brief update on current real estate trends which we are watching closely.
Recent positive trends worth noting:
- The U.S. unemployment rate has dropped for 6 straight months. 638,000 jobs were added in October and the unemployment rate dropped to 6.9% from 7.9% in September. Read More
- U.S. manufacturing activity reached a 2 year high in October with new orders at their highest level in 17 years. Read More
- The U.S. economy grew at the fastest pace in the postwar era in Q3, as GDP grew at an annualized rate of 33.1%. Read More
- Pfizer & BioNTech announce their COVID-19 vaccine candidate achieved success in first interim analysis from phase 3 study. Read More
It has now been over 3 months since the last government stimulus checks were sent to millions of Americans. While many believe there will be a 2nd round of stimulus, this has not yet happened.
How have Multi Family Apartments performed over the past few months?
Firstly, Apartment communities continue to experience high tenant demand as multi-family fundamentals have been strong for the past decade. High home values have kept many folks renting.
Secondly, In the absence of additional government stimulus, Moody’s Analytics recently noted in Q3 2020, the national apartment vacancy rates remained relatively stable with a slight rise of 10 basis points to 5.0%.
Thirdly, As of October 27th, 94.6% of apartment households made a full or partial rent payment. This figure is up 2.4% from September 27th.
Meanwhile, national asking rental rates declined by 1.8% in Q3, one of the largest declines in history. We are closely watching this recent national downward trend in rental rates. However, we are observing many properties and markets that are reacting differently.
For example, we weren’t surprised to discover New York’s effective rental rate suffered the largest decline with a 7.2% drop in Q3, and San Francisco’s effective rents dropped 5.7%.
Thus far, we have seen consistent stability and very little volatility across many markets in terms of apartment pricing and cap rates. Furthermore, in some markets demand outweighs supply and for-sale properties are experiencing bidding wars.
In summary, most apartment residents continue to stay and pay even after several months of no additional stimulus. While some markets are experiencing flat and declining rental rates, many affordable and growth markets have proven to be resilient thus far.
During volatile times like these, it is imperative that we follow the local trends.
At the time of writing, the JKAM Diversified Real Estate Fund is invested in 4 different apartment communities where collections have been stable. In addition to the Fund’s four assets, I am personally invested in multiple deals with multiple operators encompassing 10,000+ doors across markets in the Southeast, Midwest and Southwest. On average, collections for 2020 are within 2% of 2019 levels. What is typically seen is that collection rates/bad debt is up slightly but extremely low vacancy rates have balanced out any downside.
JKAM will continue to source and fund strong risk-adjusted projects with our operators. Furthermore, JKAM commits to providing our clients with strategies for tax-advantaged gains. These opportunities are typically difficult to access through traditional wealth management channels. Learn how you may earn 10% fixed or 15%+ equity returns. Create a secure account here: