Small town searches (under 50,000 population) are up 71% on Redfin. The crazy part is that’s the least significant number on where trends are heading…
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Eric Worral: (00:00)
Hey everybody! Welcome back to another episode of RentPrep for Landlords episode #316. And we’re going to be talking about data trends and real estate in a COVID-19 world. So this is kind of a followup to last week’s podcast, which we talked about a mass exodus from cities, but I found some recent articles that are very interesting giving some data on what is happening right now, where people’s interest lies and where they are looking at when it comes to real estate. And there’s some pretty convincing data from some very reliable sources on what people are looking at and where the trends are starting to shift towards. So we’re gonna be talking about that in today’s podcast. I’m going to get to that right after this.
Voice Over: (00:41)
Welcome to the Rent Prep for Landlords Podcast. And now your host, Eric Worral.
Eric Worral: (00:46)
So we’ve got two articles we’re going to cover today. The first one is The Rising Interest in Rural and Small-Town Real Estate by Brad Cartier. This is on fool.com and a very interesting article where it breaks down some data from the popular website Redfin.
Eric Worral: (01:02)
So it says over the past few months, urbanites have been faced with a much different reality than those living in more rural and smaller communities, higher sickness levels, difficulties accessing basic necessities and limited space have pushed many city residents to explore real estate purchases outside of urban settings. So this is all stuff that we’ve been talking about, but the part that I think is really interesting is this upcoming paragraph I’m gonna read to you here that gives us some actual data towards it.
Eric Worral: (01:24)
It says a report from Redfin highlights. This trend, showing that by late March, the seven day average change in page views of homes in rural and small towns was up. Get this 115% for rural areas and 88% for small towns respectively. So further, the decline in pending sales was less dramatic in small towns than in urban ones. According to Redfin lead economic or economist Taylor Marr the ongoing pandemic has shined a bright light on one of the historic downsides of density. The possibility for the spread of disease will remain to be seen if it shifts in demand away from urban metros last or is temporary. So in Redfin’s 2020 first-quarter earnings call Redfin CEO, Glenn Kelman said, we’re also preparing for a seismic demographic shift towards smaller cities. Prior to this pandemic, the housing affordability crisis was already driving people from our cities to small and now more permissive policies around remote work and a rising weariness about close quarters, but likely accelerate that trend Coleman continued. He said since March 15th searches for homes and towns with populations under 50,000 people increased 71%. He added that more people will be leaving San Francisco, New York, and even Seattle, and some for nearby towns like Sacramento and Tacoma that are close enough to support a weekly office visit and others offer completely remote life in Charleston, Boise, Bozeman, or Madison.
Speaker 2: (02:54)
Eric Worral: (02:55)
Ah, so that’s really interesting. You know, it’s not that search volume necessarily predicts actual sales volume, right? But the fact that the population of 50,000 hadn’t increased search volume is 71% since March 15th. It says your recent Harris poll found that more than three and 10 people in America say the pandemic makes them want to live in a rural area. And one in four now want to live in a suburb exterior to a major city in a separate Harris poll. It was found that nearly 40% of city dwellers are considering leaving the city due to the pandemic. Alright, so Tim Ellis, senior data journalist at Redfin is quoted saying based on what we’re seeing in the data so far, it looks like the housing market and rural areas and small towns will weather the storm through the coronavirus shutdowns better than the big cities. We also may see an increase in home sales and these less densely populated areas in the longterm, as well as home buyers, look to get away from the cities or just purchase a second home that they can retreat to when times in the city get rough, as companies continue to loosen their work from home policies, including Twitter, which just announced that all employees can work from home and definitely expect interest in a rural and small-town, real estate to increase.
Eric Worral: (03:58)
So just kind of reiterating a lot of what we talked about in the podcast last week, but I just found this article really interesting as far as the stats that it has coming from Redfin, which is if you’re not familiar with Redfin, it’s kind of like a Zillow where you can post properties, but they do a lot of like real estate related data studies and a really, really interesting, I mean, those are huge numbers when you’re talking about, you know, I think it was 115% increase, an 88% increase in searches for rural and small towns. And then also they quoted at saying that it was a 71% increase for towns with populations under 50,000 people. It’s really hard to say, you know, like, cause I feel like a lot of times people have pretty short memories you know, something while you’re in, it seems awful and horrific.
Eric Worral: (04:42)
And then like a year later you’re like, Oh yeah, that sucked. But you know, it’s like, will this be enough? And it kind of depends. I think on how long COVID-19 lingers, how impactful it is in the city that you’re living in. But the fact that, you know, kind of, not sure off the top of my head, but like I want to say New York City Metro area is like something like 16, 20 million people. You know, that’s not a small number. Like if you’re talking about a country with 300 something, million people you’re potentially talking about five to 7% of the country’s population wrapped up and one area that was heavily affected, you know, and it doesn’t necessarily even have to be something that, you know, you got sick or your loved ones got sick, but it’s really just the experience of living in the city.
Eric Worral: (05:27)
I have a sister in law brother-in-law that live in San Francisco, actually Oakland just across the water and you know, they haven’t left their apartment. You know, he just went back to work a couple of days a week, but like either all those amenities, all those nice things that people want to live in the city for, for the convenience are all stripped away as well. So it’s not just the threat of sickness, but it’s also the reason that you’re paying that $3,000 a month in rent is kind of useless now. Like you could live anywhere and you’re spending all that money and it’s just like, you know, everything’s a supply and demand. And if you can work from anywhere and all the nice things about where you live are stripped away and you have a really high rent, I can’t imagine that many people saying I want to do this forever.
Eric Worral: (06:11)
So it’s going to accelerate the people that want to leave and go somewhere new. So the other thing I wanted to talk about today recent article and recent story, this was from nextcity.org and the authors, Jared Bray, June 15th. So it was just published recently, but it says the title is Will Ithaca’s #CancelRent Resolution Actually Cancel the Rent? So maybe you heard about this. There’s a kind of a hippie little town in the middle of New York state. And it’s interesting. So a lot of people think like New York, they have this misconception where it’s like a New York City as the entire state. Well, it’s not, obviously, there’s upstate and in the middle of New York, a lot of farm fields, a lot of rolling hills and the finger lakes and there’s this beautiful college town Ithaca. And they have these gorgeous and these beautiful waterfalls.
Eric Worral: (06:58)
And it just like really interesting town. I’ve actually only been there a couple of times. My wife went to school at Ithaca and Cornell is there as well. So most of the renters in that area are students and going to either Cornell or Ithaca. And recently there was a Change.org. You know, a petition started got over 5,000, I think, signatures to cancel the rent in Ithaca. And it’s actually picked up quite a bit of steam.
Eric Worral: (07:24)
So 5,000 signatures over the past few months, the Ithaca Tenants Union has developed the demand into a cancel rent campaign as part of a statewide campaign managed by housing justice for all earlier this month under sustained pressure from the ethic attendance unit and hundreds of runners, Ithaca became the first city in the United States to vote in favor of canceling rent the strategy, a resolution requesting additional executive power for the mayor isn’t certain to pay off, but organizers and supporters are hoping that if nothing else, and inspires other cities to show their support for rent relief and builds pressure on the state to act our strategy is to do a organizing of people whose decision affects first because that’s really the majority in a lot of places and focuses on convincing legislators second, Rand says that ultimately this should be up to the people who are affected by our system of government. It’s been very clear during the crisis have been insufficiently set up to handle it fully on June 3rd as the Ithaca journal and other outlets reported the Ithaca common council of groove to a resolution requesting that the New York State Department of Health authorized the mayor to forgive via executive order three months of all residential and small business rent payments and additional fees, which are due through June, 2020, an earlier statewide executive order gave the department of health, the power to approve all local COVID-19 executive orders. So in Ithaca, the principle of the cancel rent effort is that the mayor with the permission of The State Department of Health would issue an executive order to erase all rent debts for residents and small businesses that accrued between April and June as part of the city’s emergency public response to COVID-19.
Eric Worral: (08:59)
So that’s pretty interesting. I didn’t really know until reading this article, how this actually works, because I’m like, how does a mayor have the power to just be like, Nope, you don’t have to pay that. You know, that’s a pretty powerful thing to say. But according to this article that is due to the permission from the state department of health, which is really interesting that the state department of health is essentially dictating the economics of an entire town. And I mean, when I say this is a college town, this is a college town. So a lot of renters, very seasonal. You know, you probably go in there middle of summer, all tourism, you know, people just checking out this gorgeous area. And then the rest of the year, a lot of college students who pay really good rent money. So it says housing is of course a vital part of the public health response to a pandemic.
Eric Worral: (09:42)
The primary advice public health officials have been given is to stay at home, to avoid being exposed to the virus and to stay home once infected, to avoid spreading it to others. Health officials and housing advocates are both worried that restarting evictions could put even more people at risk of exposure needlessly. So while city council members briefly entertained a rent cancellation measure in San Jose, cities have so far been unable to act on their own concerned about certain legal challenges from property owners. Ithaca’s approach is novel and bold steps, says Rebecca Garrard, the campaign’s manager for housing justice at citizen action of New York. Well, you typically find is that no municipality wants to go first on anything she says, who is helping to manage the housing justice for all campaign and worked with the Ithaca Tenants Union on the resolution. Once one municipality goes, it’s enormously easier to get more municipalities to act.
Eric Worral: (10:30)
This was really an ingenious and yet very valid means by which to gain this power. So, I mean, we’ve talked about this before on past podcasts, like what are, what are the downsides of this? I, the first ones that come to mind obviously is cash flow for the property owner, but then the fact that that property owner has to pay a mortgage and has to pay taxes. Well, if this syncs that property owner, let’s say you owned ODA tent, or you owned 10 rentals in Ithaca, you know, and that’s where, you know, you’re making your money. And then all of a sudden you had three months of rent that were just canceled out. And let’s say, you know, you were cash flowing about 10% on those rentals. So if the year the rent was a thousand dollars and you’re making a hundred dollars a month in that rental, well, that’s gonna really mess things up for you.
Eric Worral: (11:16)
Let’s say at 10 rentals, right. That are all doing a thousand dollars. So you got $10,000 a month, but really the actual cashflow of it was a thousand dollars a month. And I know I’m just kinda throwing some numbers out there, but that means that you really owed money $9,000, right. So mortgages and whatever else, you’re paying taxes and everything else. So for those three months, instead of being up what you normally would have been $3,000, now you’re down $27,000, you know? So that is a huge swing, you know, and even if you want to say, my numbers are crazy and you’re like, no, that person’s cashflow in 20%. Well, okay. Instead of being up $6,000, right. You can do the math, you’re down $24,000. That, and this is not, you know, we’re not talking about Proctor and gamble and Nike and these huge corporations, we’re talking about a small business landlord, private landlord.
Eric Worral: (12:11)
So it’s not like they have these cash reserves to be like, okay, yeah, I’ll just, you know, throw $25,000 at this. And the other issue now that we talked about on a past podcast is that when these landlords can’t afford the rent, what happens is that they go into foreclosure and they can’t, you know, keep up the properties. But one of the real big issues is they can’t pay the debt. They can’t pay that mortgage. Well, these mortgages, a lot of times are bought up in packages by big wall street investors. So those mortgages are even tied into sometimes to people’s pensions because these pension plans are managed by big money managers. And a lot of times it’s not your traditional like, Oh, we’re just buying the stock market. Like they’re buying debt packages. And the idea behind that is when they’re buying the debt, you know, these mortgages a cluster of them, they are getting a good percentage, but is banking on the fact that these mortgages are going to be paid.
Eric Worral: (13:01)
So it’s just that trickle down effect. So I don’t think a lot of times these, you know, the tenants union is thinking about the fact that you could be racking pensions for people. If you, you know, and of course this isn’t going to happen just if one college town does it, but the proponent from the Ithaca Tenants Union, Garrard is her last name. She said it, you know, once one municipality goes, it’s just enormously easier to get more municipalities to act. And we have seen this with other things such as statewide rent control. You have seen that pop up in Oregon and then California, and then New York. And it’s just kind of a Domino’s type thing. So this is a, this is kind of dangerous stuff. You know, and the other thing that’s interesting too, is Ithaca is a very expensive school Cornell State, you know, it’s a little bit cheaper, but, you know, because of this pandemic, what we’re seeing is there’s different tier schools.
Eric Worral: (13:52)
So there’s tier one, tier two, tier three tier one might be, you know, Yale, Harvard, Brown, you know, all Ivy league then are your tier two schools, maybe like a Boston college or something like that. And then you get your tiers three, which is really your private schools, like in my opinion, and probably Ithaca. You can make the argument that it’s a tier two school. I mean, it’s good education, but it’s very expensive. You’re gonna pay 30 to $50,000 a year to go there. And part of that, the reason you’re doing that as the experience, right? It’s a beautiful campus. It’s a beautiful place to spend four years of your life and to be able to soak in all these experiences. And now if it’s going to be distance learning, nobody’s going to want to spend 30 to $50,000 to do distance learning at a school that really you’re paying for the experience, just as much as you were paying for the education.
Eric Worral: (14:41)
So what you’re going to see is for a landlord, this is a very scary time, especially in college towns, because you’re going to see less kids attending those schools. So there’s going to be less demand for your property. And then you might, on top of that, have a three-month rent cancellation that this is just going to sink a lot of landlords, and it’s not uncommon for landlords to buy where they know, right. Most landlords are not buying, you know, properties and all these different States. And they’re diversified between, you know, single units and apartment buildings. No, like you find something, you know, and understand and you replicate it and you duplicate it. So what I think is going to happen is you’re going to have a lot of small landlords in Ithaca that might own one property, five properties, seven properties, but they are not diversified at all these other places because that’s the area they know, and it works for them.
Eric Worral: (15:29)
So it’s just really unfortunate because, and it’s unfortunate for everybody. I know I haven’t really addressed it, but there’s a lot of atrocities happening right now for renters. And it’s just a really, really difficult conversation to navigate. But in my opinion, canceling the rent without having some sort of further support for the person who is in charge of paying that mortgage, the landlord, you gotta have that part of the system. If you’re going to cancel the rent, you got to cancel the mortgage payments on on those months as well. Otherwise, you’re going to sink those landlords. And then the housing is going to fall off what landlord is going to pay to upkeep a property when they’re in the red, you know, because they just lost $20,000 in three months. So it’s really important. I think that they not only think about the tenants, but they also think about the landlords in this situation.
Eric Worral: (16:15)
So reading further in this article, it says the Department of Health operates as an extension of Governor Cuomo. Garrard says, I do not anticipate governor Cuomo being supportive of this measure. So for me, what’s vitally important is for a state agency like the Department of Health to operate within the intent of their purpose and with the autonomy that they should have to focus on health and public safety and not political consequences. It’s basically what she’s saying is she doesn’t anticipate the state governor to support this. So they’re circumventing the governor and going to the department of health to kind of oversee and supersede the governor’s power. And it says that Ithaca Alderperson Ducson Nguyen who sponsored the resolution, I didn’t realize that was a person’s name. I apologize. I didn’t mean to laugh at him who sponsored the resolution said it was only possible because of intense pressure from the Ithaca Tenants Union and its supporters.
Eric Worral: (17:08)
The group had initially asked for a change to the city code. And when says that the members of the common council told them that it was almost certain to fail. Even the resolution requesting executive authority, nearly failed eventually passing by a vote of six to four and says that he’s not holding out hope for the department of health will approve the request. So we were honest that it was a long shot, but it was a catalyst for other activism. And hopefully, it gets the state’s attention. Even if they turn us down, it’s clear sign that there’s a crisis in the event that the state does approve the request. Nguyen says the mayor still won’t act unilaterally, but instead create a task force that would sort through the most effective ways to cancel rent debt for tenants while protecting small landlords from foreclosure in the process.
Eric Worral: (17:53)
So it’s all kind of up in the air still kind of depends on what happens with the state department of health. If they actually go through with this, then what the governor’s reaction would be to this and how that all kind of works together. And seeing if they are going to figure out a way to protect these small landlords, meanwhile, members of the Ithaca Tenants Union, many of whom who have spent countless hours organizing together despite never having met in person say they’re hopeful, the department of health will actually approve the request. They’re hopeful that the state will act to protect thousands of tenants who live in Ithaca and are struggling to make ends meet. And they’re proud that they got Ithaca to act first as not a Testament to how progressive the city is that this could succeed, said Elliana Pfeffer, an organizer with the tenants union. “it’s a testament to organizing and to showing how popular it is.”
Eric Worral: (18:38)
So there’s that in a nutshell of what’s happening in Ithaca. And like we said, it’s important to follow, even if you don’t own property in New York, because there is a domino theory with these types of things. And if they figure out the pathway to do this by circumventing the governor and getting what they want, then you may see this replicated in other areas by getting the State Department of Health involved and giving more power to the local governor mayor, excuse me, local mayor, to be able to cancel rent. So, very, very interesting. I know that it’s kind of scary for landlords, but I’d like to believe, and it didn’t make one small mention about while protecting small landlords from foreclosure and the process, but it’ll be interesting, you know, watching Ithaca and seeing what happens there, I think is the thing that you’re gonna want to watch, and I forget what it’s called, but in like legal terms, right.
Eric Worral: (19:28)
There’s always a precedent, right? That’s what you’re looking for. They’re like, well, has this ever happened before? Is there a precedent? And that’s why these legal cases that set precedents are so important because it’s going to change the way that the law is viewed going forward. Well, this is the same thing. They’re essentially trying to set a precedent. And if they do other towns are going to be able to look at this and say, all right, that is the roadmap. This is how we can get this done. And we don’t even need the governor really to be the one who pulls the trigger on him. So really, really interesting stuff. Hopefully, you know, they figure out something that works for everybody. We want to be able to protect runners, but be able to protect landlords as well, because in a lot of ways, they are the backbone of a lot of the economy.
Eric Worral: (20:08)
You know, there’s just so much trickle downside effects of this. If they were to just hurt these landlords, that just, I think it would be very difficult to recover from. So it sounds like they are considering all sides, but you know, these things are still new and figuring it out. So hopefully if there is a roadmap created in Ithaca, they’ve got to figure it out so that it’s helping everybody involved. And yeah. I know it’s scary stuff for you guys, listen to that, but I just want to keep you guys informed of what’s going on as we progress through this. And that is obviously what probably the biggest news article that I have seen pop in the last week is what’s going on out in Ithaca, New York. All right, guys, that’s it for this week. I hope you’re doing well where you’re at.
Eric Worral: (20:48)
I know out here, things are starting to settle into a group. Finally, a wife is you know it works in a school district. So off starting pretty soon here in a couple of days, actually, by the time you guys hear this, so it’ll be a day or two. And trying to just figure out our new normal. But I think that’s really important to understand, you know, things aren’t going to be the same for a while, but you can enjoy your new normal, make the best of it. And you know, keep on keeping on, as they say in the movie old school. Right. I think that’s what he says to blue. Keep on, keep on trucking, you know, but I’m just kind of babbling at this point. All right, guys, I hope you have a great week and I look forward to catching up with you next week. Alright. Take care.