Zip-code level three-bedroom SFR rents have a wide range of $1,050 to $2,300 across the metro. Atlanta ranks 7th in the U.S. for five-year SFR rental price increas - es with a 33 percent gain. More expensive areas have seen moder- ate appreciation of 15 to 20 percent, while less expensive areas show larger increases up to 35 to 40 percent. Even with aggressive rent in- creases over the last several years, the Atlanta MSA rent-to-income ratio still ranks as the 17th most af- fordable rental market, coming in at 25.2 percent - substantially below the national average of 32 percent. Rent-to-income ratios nearest to the city range between 30 and 40 percent, as these areas have a larg- er segment of low-wage earners. Suburban areas show a moderate rent-to-income of 20 to 30 percent. Though many areas of the mar- ket are affordable, a large cohort of the rental population is suddenly unemployed. Extended unemploy- ment benefits expire at the end of July unless additional stimu- lus measures are passed. State eviction suspensions are set to expire July 14th in Georgia, which could leave a significant number of vacancies. Atlanta Rental Rates Prediction 2020 Positives for the market include comparatively low rent vs. income ratios and the momentum of the strong economy bringing in new residents. Rental increases have been in-trend with wage growth to create a stable rental price envi- ronment. WHERE DO RENTS GO FROMHERE? Risks stem from the large num- ber of lower-income jobs affected by the spiking unemployment, and
will continue to be a great mar- ket for investment, even with the challenges of COVID-19. The local economy is very well balanced across a mix of industries leading to excellent pre-COVID-19 year-to- year increases in population, jobs and wages. It is a steady, performing mar- ket that provides investors with a balanced opportunity for equity appreciation supported by rental cash flow with a low downside risk. Yields are also at a comparatively high rate of 8 to 12 percent. The area has shown strong home price appreciation in the past five years, yet many suburban areas remain very affordable with median prices between $200 and $250 thousand. It’s also benefited from a steady increase in wage and employment growth, so the market is not overheated. While the rental market is strong with below average rent- to-income ratios, rental prices may see a short-term dip. Mul- tifamily rentals will be more adversely affected by decreased demand and a longer recovery. The SFR rental market should recover quickly which provides investors with abundant cashflow opportunities. Be aware that homebuyers seeking affordability, space, and reduction in virus exposure are driving interest from the city out to the suburbs. Also, rental and home prices will flatten or marginally decrease if the economic downturn continues in the next one to two years. •
tenants may struggle to keep up with payments. Increased evictions will add more vacant inventory. Economic effects have increased demand for affordable housing and Section 8 subsidized rentals. High-end rentals will see a drop in demand as some areas are less expensive to own than rent, which could reduce rental demand heading into the peak summer/fall seasons. Q3 2020 Rent Price Forecast: 0% to +3% Late fall and winter months are typically seasonal low points. If home prices dip during this time, more demand could be lost due to low interest rates providing opportunities for renters to convert to homeowners. Unemployment may remain high and put further downside pressure on rents. In- creases in COVID-19 cases should not affect rental prices directly but could slow the employment recov- ery leading to continued evictions and elevated vacancy rates. Q4 2020 - Q1 2021 Rent Price Fore- cast: -10% to -5% The single-family rental mar- ket will see increased demand as people migrate away from mul- tifamily property classes. Until employment and wages recover, rental rates will see minimal ap- preciation similar to the stagnated period between 2010-2015. If the virus issues abate and all phases of businesses can return to full ca- pacity, this will lead to accelerated rental price recovery. Q2-Q4 2021 Rent Price Forecast: -3% to +3% CONCLUSIONS Atlanta has been a favorite target for investors since the last reces- sion. Our forecast for the near and long-term is that Atlanta is and
Fred Heigold III is the senior data analyst at Altis- ource® / RentRange®, an industry leader in market data and analytics for the single-family rental housing industry.
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