The fates of the for-sale housing market and the for-lease apartment sector have always been inextricably linked. While shifts in preferences, underwriting standards, household finances, and demographics create changes on the margin, the investment health of housing in the United States moves as a monolith over the long term. Since 1985, rents and home prices have had a correlation above 96%. Over the short term, however, cyclical factors can distort strong-rooted structural relationships. Considering the unrelenting pace of volatility the housing market has absorbed since the pandemic, opportunities for distortions are plentiful. In this briefing, we will explore changes in for-sale asset prices and rents across the 100 largest US metro areas, as tracked by Zillow. In doing so, this study will identify markets that have seen home prices rise more quickly than rents since the onset of the pandemic. With the long-term relationship between rents and home prices in mind, we consider markets with large differentials prime candidates for faster-than-average rent growth for the years ahead. McAllen, Texas McAllen, TX — perhaps surprisingly — leads the country with the most substantial home price/rent growth differential since the onset of the pandemic (31.2 percentage points). The metro area, which sits at the Texas southern border and is home to nearly 900 thousand people, has seen home prices skyrocket by 57.0% between February 2020 and February 2024. Meanwhile, rents have risen only half as quickly, increasing 25.8% over the same period. Population growth in the McAllen metro area continues to be robust, more than doubling the national average in each of the past three years. Charlotte, NC Charlotte, NC, is the first of three North Carolina metros on the list — highlighting the interconnectedness of the state’s local economies. Since pre-pandemic, home prices in Charlotte have grown by 55.8% while rents have risen by 33.6% — resulting in a 22.2 percentage point differential. Despite already holding the title of North Carolina’s most populous MSA (2.8 million residents), Charlotte continues to keep its foot on the gas. In each of the past three years, its annual population growth rate has accelerated, reaching a recent high of 1.8% in 2023. Durham, NC Durham, NC, is the smallest metro area to make the top five, with a resident population of just under 609 thousand people. Between February 2020 and February 2024, home prices in Durham are up by 52.1%, while rents have jumped by 31.3% (20.8 percentage point differential). North Carolina’s ability to attract and retain labor market talent continues to be a hallmark of its success. Hiring growth in the Durham MSA is outpacing the US average, with the number of employees in the metro rising 2.4% year-over-year through February 2024 (US: +1.8%). Raleigh, NC Located just 30 minutes southeast of Durham, Raleigh’s post-pandemic housing market trends are a mirror image. In Raleigh, home prices have risen by 50.2% over the past four years, while rents have grown by 29.7% — yielding a 20.5 percentage differential. Of all the top five markets on this list, Raleigh had the fastest-growing population in 2023, with its base of residents swelling by 2.0%. Moreover, since 2020, the resident population in Raleigh is up by an impressive 6.5%. Over the same period, the US population has grown by just 1.0%. Seattle, WA Rounding out the top five is Seattle, WA. Seattle is the only metro at the top of the list where metro-level home price growth has not exceeded the national average over the past four years. Home prices in Seattle are up 38.7% compared to pre-pandemic — sitting below the 41.9% measured nationally. Similarly, rent growth has also lagged the national average, rising by 19.1% between February 2020 and February 2024 (US: +29.9%). Still, the differential between home price and rent growth is a substantial 19.6 percentage points. While Seattle is the largest metro area to make the list (4.0 million residents), it is also the only metro to see any recent population declines during the post-COVID era (2021: -0.3%). However, the metro has swung back into growth, adding residents in 2022 (+0.4%) and 2023 (+0.3%). Notably, while Seattle’s growth is tepid compared to the Sun Belt standouts, other West Coast comps, such as San Francisco and Portland, have continued to see population declines in each of the past two years. Methodology:  Data are from the Zillow Observed Rent Index (ZORI), measured through February 2024. Qualifying metros are ranked by the differential between total home and rent price growth between February 2020 and 2024. Qualifying markets for this study are those meeting the following five criteria: -              Top 100 MSA by population -              Positive annual home price growth through February 2024 -              Positive monthly home price growth through February 2024 -              Positive annual rent price growth through February 2024 -              Positive monthly rent price growth through February 2024

This is the second chapter of Chandan Economics's 2024 special report on Racial Inequities in US housing that explores economic performance outcomes in housing by race in housing affordability, household wealth, housing and environmental quality, and credit access. When it comes to sizing up the racial wealth gap, there is no shortage of quantifying methods. However, given how income and asset building play a significant role in upward mobility, measuring household wealth gives us a metric that reflects economic effects on current and future generations. According to a 2019 paper by Opportunity Insights, Black Americans and Native Americans have significantly lower rates of upward mobility than White Americans, contributing to an intergenerational wealth gap. The impact of the persistent racial wealth gap stretches beyond economic outcomes, affecting environmental quality, crime, and health outcomes in minority-majority areas. The Homeownership Gap The homeownership gap between Whites and Minorities is an important metric that underscores the multi-generational challenge of reducing racial disparities in wealth. According to Chandan Economics' calculations of data from the 2022 American Community Survey (ACS), just 43.2% of Black households were homeowners compared to 72.2% of White, non-Hispanic households— a racial disparity gap of 29 percentage points. White, non-Hispanic households are the only group with an average homeownership rate above the national mean of 65.3%. Racial disparities in homeownership rates are less pronounced than disparities in affordability but persist. 62.4% of Asian American or Pacific Islander households are homeowners, while Native American (57.0%) and Multiracial households (56.0%) sit slightly lower. Hispanic households and all other racial groups hold homeownership rates closer to the bottom of the distribution, charting at 51.7% and 48.5%, respectively. Despite the dismantling of many discriminatory lending and underwriting practices over the last several decades, the gap between White and Black homeownership remains as wide today as it did before the civil rights era. In 1960, the White homeownership rate was 65%, and the Black homeownership rate was 38% — a 27 percentage point gap. In the decade following the Great Financial Crisis (GFC), homeownership rates broadly declined across all races and ethnicities. Still, the gap widened as Black and non-White Hispanic households were more than twice as likely as White households to receive a sub-prime loan during the housing bubble — exacerbating the crisis's impact in minority-majority communities. The homeownership gap between Whites and minorities has declined modestly during the pandemic years, driven partly by the wage increases and location flexibility brought forward by pandemic effects. However, through the end of 2023, a 27.9 percentage point gap remains between the top and bottom of the homeownership distribution — offering sobering evidence of America's tepid progress on racial disparities in wealth.

This is the first chapter of Chandan Economics's 2024 special report on Racial Inequities in US housing that explores economic performance outcomes in housing by race in household wealth, housing affordability, housing and environmental quality, and credit access. In 2024 housing affordability remains one of the most stubborn and widespread challenges for the US economy. Home prices sit at all-time highs, while generationally high mortgage rates continue to keep would-be buyers and sellers stuck in neutral. Consequently, segments of the nation's housing demand have shifted back into rentals — revealing a deeper magnitude of both affordability constraints and racial inequities.

Over the past decade, no housing type has generated more interest and intrigue than single-family rentals (SFR). Rapid re-invention has been the only constant for the sector post-financial crisis, with a meteoric rise, its emergence as an affordable suburban entry point, and the introduction of purpose-built communities appearing as just some of the highlighted chapters. In this data deep dive, we will explore how the demand profile of the sector is transforming. Utilizing detailed surveys from the US Census Bureau, this analysis will examine how the demographic profile of households moving into SFRs differs from those who already call SFRs home. About the Data: All data in this report are based on a Chandan Economics analysis of the US Census Bureau’s 2022 American Community Survey. Data were accessed using IPUMS. Age The age difference between renters moving into SFRs and those already in the space is stark. The average age of a head of household who moved into an SFR in the prior year was a youthful 38.8 years old. Moreover, nearly half of all new SFR households are headed by someone below 35. Meanwhile, the age profile of pre-existing SFR households skews considerably older. For SFR households that did not move in the year prior, the average age of the householder was 47.1— 8.3 years older than new SFR renters. The share of pre-existing SFR households headed by someone over 35 is also considerably smaller, at just 25.5%. Children The share of households containing children is where new and preexisting SFR renters appear most similar. However, there are still meaningful differences. 41.4% of new SFR renter households have a child in the home — 7.1 percentage points lower than preexisting SFR households (48.5%). These data suggest that many young households choose SFR not because of additional space needed at the time of move but because they are thinking a little down the road. Income Considering new SFR households are, on average, younger than their preexisting SFR neighbors, it would be reasonable to expect them to have lower incomes due to less career experience. Yet, the data indicate otherwise. Instead, new SFR households out-earn preexisting SFR households by an average of more than $11k. New SFR households have an average annual household income of $83,635, while preexisting SFRs earned $72,246. Education With new SFR households holding higher average incomes than the rest of the SFR tenant base, unsurprisingly, the education attainment profile of this group also looks different from the rest of the sector. For new SFRs, the share of householders with a four-year degree (or higher) was 35.6% — accounting for a little more than a third of this group. Conversely, only 23.9% of preexisting SFR households had at least a four-year college degree. Takeaways In total, households that report moving into their homes in the past year account for slightly less than 23% of homes in the SFR sector. At that rate of churn, new households have the power to transform the sector's profile rapidly.  As these data detail, the average SFR household entering their unit materially differs from renters already in their homes. They tend to be younger, more highly educated, have higher income levels, and are less likely to have already started a family. While the sector serves a diverse spectrum of households, these findings underscore how SFRs are filling the market void for affordable starter homes.

The US economy remains on solid footing as the end of the year approaches, shrugging off earlier forecasts of a 2023 recession. However, the latest edition of The Fed’s Financial Stability Report depicts an increasingly complex risk landscape for the US financial system as we look towards 2024, driven by elevated inflation expectations, geopolitical uncertainty, and other salient risks. The semi-annual survey reviews conditions affecting financial stability in five critical areas of focus—valuation pressures, borrowing by businesses and households, financial-sector leverage, funding risks, and near-term salient risks. The first four categories reflect what Fed economists view as the primary cyclical vulnerabilities to the financial system at any given time. For example, household debt levels help us consider how the average American might fare if financial pressures increase, while bank liquidity levels give us clues about the financial system’s susceptibility to risky loans circulating in the market. These four cyclical risks remain low by the Fed’s accounting. The current household debt to GDP ratio remains close to historical averages and continues to decline. In contrast, business debt has climbed but appears sustainable at current interest rates. Further, despite distress in the sector earlier this year, US banks remain highly liquid with capital ratios close to previous decade averages. However, the fifth category, which considers emerging risks more salient to the current environment, appears to be rising. According to the results of its October survey, each of the five separate salient risks to the financial system that Fed researchers have identified in 2023 have either risen or remained unchanged relative to May. Inflation and Real Estate Risks Remain The two most present risks cited in the survey were the threats of persistent inflation and distress in the commercial real estate industry, each referenced by 72% of respondents. Curiously, inflation risk is increasingly cited despite the Fed having spent the past 20 months fighting it and evidence that price pressures have receded in recent months. However, the report crucially points out that geopolitical risk in energy markets remains a key factor and can lead to renewed cost pressures outside the Fed's scope of influence. Further, if energy prices remain stubborn, the Fed's monetary policy actions are constrained, limiting any potential for rate cuts in the near future. Luckily, energy prices have experienced a sharp decline in recent weeks, providing some breathing room for The Fed to consider the next steps. Commercial real estate concerns also remain top-of-mind for respondents, primarily emanating from the risk that a slowdown in US growth could expose overleverage in the industry, leading to defaults and financial system contagion. The concern is directed mainly towards the struggling office sector, which has seen significant post-pandemic devaluation and could amount to pronounced losses among financial intermediaries in a worst-case scenario. Global Risks Rise The most significant jump is the risk posed by weakness in the Chinese economy. In May, just 12% of contacts surveyed cited weakness in the Chinese economy as a significant risk to the US financial system compared to 44% in October. Cascading strains in the world's second-largest economy, including a severe property sector downturn and a growing fiscal crisis among local governments, risks spilling over into global markets. Geopolitical risks, mainly stemming from the Russia-Ukraine war and US-China relations, were decreasingly cited in the October results. However, the survey was conducted before the October 7th attacks on Israel and does not reflect the increased concern of a broader Middle East war since Israel began its operation in Gaza. The survey was also produced before President Biden's summit with Chinese President Xi, where both leaders emerged with a more diplomatic tone towards each other than in previous months. The report notes that rising geopolitical tensions could pose a risk to global economic activity, including disruptions to trade, food and energy supply, and risk appetite in the financial markets. Looking Ahead In the weeks since the Fed's report was released, several market-moving events have taken place that could realign risk evaluations to begin 2024. The most obvious is the October 7th attacks on Israel and subsequent war in Gaza, which has introduced a new geopolitical wildcard to an already jittery global marketplace. Domestically, slowing inflation and an averted US government shutdown have boosted market optimism, while a summit between US President Joe Biden and Chinese President Xi Jinping has renewed hopes of a diplomatic thaw between the two economic powerhouses. How these flashpoints develop alongside cyclical factors over the next few months will shape risk calculations heading into 2024.

Presented By Key Takeaways The on-time payment rate in independently operated rental units improved marginally in October 2023, rising to 82.6%. Compared to a year earlier, the on-time payment rate remains up by 102 bps. The October 2023 forecast full payment rate is 92.8% — matching the post-pandemic high watermark. Western states continue to hold the highest on-time payment rates in the country, led by Utah (93.8%), Idaho (91.7%), Colorado (90.6%), Washington (89.9%), Oregon (89.5%), Arizona (89.1%), and North Dakota (88.7%). Small multifamily (5-49 units) rental properties held the highest on-time payment rates of all sub-property types in October, coming in at 83.2%. National Overview On-time rental payments in units operated by independent landlords remained robust in October 2023. As of this month’s preliminary estimate, 82.6% of tenants in independently operating rental units have completed their monthly payments on time. The on-time payment rate is up by 21 bps from the month prior and 102 bps from the same time last year. Encouragingly, on-time payment rates have now held above 82% in eight of this year’s ten months — a threshold only surpassed once in all of 2022. October’s forecast full-payment rate, which takes on-time payments, late payments, and expected late payments based on historical trends, came in at 92.8% — remaining unchanged from the month prior and matching the sector’s post-pandemic high watermark. Compared to a year earlier, the full-payment rate is up by 92 bps, underscoring the apartment sector’s continued gradual improvement. Overall, these data reflect that rental households are maintaining the ability to pay their rent in a timely fashion. Improvements in rental payment performance are partially attributable to the US labor market maintaining its strength in 2023 better than most economists anticipated would be possible. Additionally, in the challenging interest rate environment where mortgage rates are pushing above 8%, many would-be homebuyers are re-engaging with the rental market. On balance, more renters with strong household balance sheets are remaining in apartments this year, which strengthens the average financial profile of renters on the whole. Data Findings: By Property Type Data Findings: By State About This Report The Independent Landlord Rental Performance report is a real-time look at how well non-institutional operators are collecting owed monthly rental payments. Utilizing data provided by property management software RentRedi, these findings have a reduced sample size of 71,685 units, which are analyzed and reported by Chandan Economics. Where sample size quality meets sufficient reporting standards, data are offered from March 2020 forward, and new trends and analyses are reported monthly. Performance trends are discussed nationally, as well as along the lines of residential property type and geography. Data contained within this report offer investors, brokers, academic researchers, and policymakers a benchmark to track the performance and health of independent landlords. About: Chandan Economics Chandan Economics is an economic advisory and data science firm serving the commercial real estate industry. The firm's primary businesses include real estate data science (REDS), economic & market research, and litigation consulting. About: RentRedi RentRedi is a property management software that saves landlords time & money by empowering them with tech to manage their rentals—all from the palm of their hand. For landlords, RentRedi provides all-in-one web and mobile apps to collect rent, list & market vacancies, find & screen tenants, sign leases, and manage maintenance & accounting. RentRedi has partnered with platforms including Plaid, REI Hub, Latchel, TransUnion, TSYS, Sure Insurance, Realtor.com, and Doorsteps to create the best experience possible. For tenants, RentRedi’s easy-to-use mobile app allows them to pay rent, set up auto-pay, report rent payments to credit bureaus, prequalify & sign leases, and submit maintenance requests. Methodology Data are reported on a forward basis from March 2020 through October 2023 (current reporting period). As of the latest month of data availability, the reduced unit sample size totals 71,685. Rent charges are measured on a 15th-to-15th-of-the-month basis. Rent charges that are issued after the 15th of the current month are treated as a rent charge for the following rent-tracking period. (E.g., a rent charge sent on August 16th would be treated as a charge corresponding to September's owed rental payment.) Only charges designated as "rental income" are included for analysis. Rent charges below $500 and above $10,000 are excluded from this analysis. Units that have not paid any form of rental income (full or partial) in the previous 60 days at the time a new rental charge is issued are removed from the sample tracking sample. Unpaid units refer to all units that have yet to fully satisfy their owed rents for a collection period. These unpaid units include units that have only partially paid their rent. As a means of reporting standardization, units with more than one monthly rent charge (E.g., rent paid weekly) are removed from the rent tracking sample.

Presented By Key Takeaways The on-time payment rate in independently operated rentals fell slightly in September 2023, declining to 82.6% Compared to a year earlier, the on-time payment rate is up by 241 bps. The September 2023 forecast full payment rate is 92.7% — the second-highest post-pandemic observation. Western states continue to hold the highest on-time payment rates in the country, led by Colorado (92.6%), Utah (91.5%), Arizona (88.3%), North Dakota (88.1%), Washington (87.7%), and California (87.1%). Small multifamily (5-49 units) rental properties held the highest on-time payment rates of all sub-property types in September, coming in at 83.2%. National Overview On-time rental payments in units operated by independent landlords remained robust in September 2023 despite sliding slightly from August. As of this month’s preliminary estimate, 82.6% of tenants in independently operating rental units have completed their monthly payments on time. The on-time payment rate is down by 78 bps from the month prior. Still, September’s national on-time payment rate is above its 12-month average (82.4%) and currently stands 241 bps higher than this time last year — reflecting the sector’s arch of continued improvement. September’s forecast full-payment rate, which takes on-time payments, late payments, and expected late payments based on historical trends, came in at 92.7% — decreasing by a marginal 19 bps month-over-month. Encouragingly, September’s forecast full-payment is the second-highest post-pandemic observation, bested only by the month prior’s 92.9%. Overall, these data underscore how the rental housing sector has managed to limit distress in a challenging interest rate environment. According to Trepp, the multifamily delinquency rate in CMBS transactions averaged just 1.8% through August. At the same time, cap rates are rising in both the small multifamily and single-family rental sectors. With tenants remaining current on their rent payment obligations, property owners are, in turn, doing so with their mortgages. As a result, operators with leased-up assets have maintained the ability to exercise patience and allow for an improvement in market pricing. Data Findings: By Property Type Data Findings: By State About This Report The Independent Landlord Rental Performance report is a real-time look at how well non-institutional operators are collecting owed monthly rental payments. Utilizing data provided by property management software RentRedi, these findings have a reduced sample size of 69,241 units, which are analyzed and reported by Chandan Economics. Where sample size quality meets sufficient reporting standards, data are offered from March 2020 forward, and new trends and analyses are reported monthly. Performance trends are discussed nationally, as well as along the lines of residential property type and geography. Data contained within this report offer investors, brokers, academic researchers, and policymakers a benchmark to track the performance and health of independent landlords. About: Chandan Economics Chandan Economics is an economic advisory and data science firm serving the commercial real estate industry. The firm's primary businesses include real estate data science (REDS), economic & market research, and litigation consulting. About: RentRedi RentRedi is a property management software that saves landlords time & money by empowering them with tech to manage their rentals—all from the palm of their hand. For landlords, RentRedi provides all-in-one web and mobile apps to collect rent, list & market vacancies, find & screen tenants, sign leases, and manage maintenance & accounting. RentRedi has partnered with platforms including Plaid, REI Hub, Latchel, TransUnion, TSYS, Sure Insurance, Realtor.com, and Doorsteps to create the best experience possible. For tenants, RentRedi’s easy-to-use mobile app allows them to pay rent, set up auto-pay, report rent payments to credit bureaus, prequalify & sign leases, and submit maintenance requests. Methodology Data are reported on a forward basis from March 2020 through September 2023 (current reporting period). As of the latest month of data availability, the reduced unit sample size totals 69,241. Rent charges are measured on a 15th-to-15th-of-the-month basis. Rent charges that are issued after the 15th of the current month are treated as a rent charge for the following rent-tracking period. (E.g., a rent charge sent on August 16th would be treated as a charge corresponding to September's owed rental payment.) Only charges designated as "rental income" are included for analysis. Rent charges below $500 and above $10,000 are excluded from this analysis. Units that have not paid any form of rental income (full or partial) in the previous 60 days at the time a new rental charge is issued are removed from the sample tracking sample. Unpaid units refer to all units that have yet to fully satisfy their owed rents for a collection period. These unpaid units include units that have only partially paid their rent. As a means of reporting standardization, units with more than one monthly rent charge (E.g., rent paid weekly) are removed from the rent tracking sample.

Presented By Key Takeaways The on-time payment rate in independently operated rentals jumped in August, rising to 82.9%. Compared to a year earlier, the on-time payment rate is up by 274 bps. The August 2023 forecast full payment rate is 92.5% — matching the post-pandemic high. A handful of western states hold the highest on-time payment rates in the country, led by Colorado (92.5%), Utah (91.5%), Arizona (89.3%), Oregon (87.8%), Washington (87.4%), and California (87.0%). 2-4 unit rental properties held the highest on-time payment rates of all sub-property types in August, coming in at 84.3%. National Overview On-time rental payments in units operated by independent landlords jumped to a five-month high in August 2023. As of this month’s preliminary estimate, 83.4% of tenants in independently operating rental units have completed their monthly payments on time. The on-time payment rate is up by a sizeable 155 bps from a month prior. Moreover, compared to this time last year, the national on-time payment rate is up by 274 bps — underscoring the sector’s continued improvement. Current collection trends constitute healthy performance. Most encouragingly, August’s forecast full-payment rate, which takes on-time payments, late payments, and expected late payments based on historical trends, improved to 92.5% — increasing nine (9) bps month-over-month. Further, August 2023’s forecast full-payment rate matches the post-pandemic high watermark set in March. Overall, these data highlight how the rental housing sector has fended off widespread distress. As cap rates are rising in both the small multifamily and single-family rental sectors, prospective buyers are lowering their valuations for deals to make sense. However, with rent collections firming, distress remains limited, and owners have the ability to wait out the current interest rate climate and allow pricing to recover. Data Findings: By Property Type Data Findings: By State About This Report The Independent Landlord Rental Performance report is a real-time look at how well non-institutional operators are collecting owed monthly rental payments. Utilizing data provided by property management software RentRedi, these findings have a reduced sample size of 66,683 units, which are analyzed and reported by Chandan Economics. Where sample size quality meets sufficient reporting standards, data are offered from March 2020 forward, and new trends and analyses are reported monthly. Performance trends are discussed nationally, as well as along the lines of residential property type and geography. Data contained within this report offer investors, brokers, academic researchers, and policymakers a benchmark to track the performance and health of independent landlords. About: Chandan Economics Chandan Economics is an economic advisory and data science firm serving the commercial real estate industry. The firm's primary businesses include real estate data science (REDS), economic & market research, and litigation consulting. About: RentRedi RentRedi is a property management software that saves landlords time & money by empowering them with tech to manage their rentals—all from the palm of their hand. For landlords, RentRedi provides all-in-one web and mobile apps to collect rent, list & market vacancies, find & screen tenants, sign leases, and manage maintenance & accounting. RentRedi has partnered with platforms including Plaid, REI Hub, Latchel, TransUnion, TSYS, Sure Insurance, Realtor.com, and Doorsteps to create the best experience possible. For tenants, RentRedi’s easy-to-use mobile app allows them to pay rent, set up auto-pay, report rent payments to credit bureaus, prequalify & sign leases, and submit maintenance requests. Methodology Data are reported on a forward basis from March 2020 through August 2023 (current reporting period). As of the latest month of data availability, the reduced unit sample size totals 66,683. Rent charges are measured on a 15th-to-15th-of-the-month basis. Rent charges that are issued after the 15th of the current month are treated as a rent charge for the following rent-tracking period. (E.g., a rent charge sent on July 16th would be treated as a charge corresponding to August's owed rental payment.) Only charges designated as "rental income" are included for analysis. Rent charges below $500 and above $10,000 are excluded from this analysis. Units that have not paid any form of rental income (full or partial) in the previous 60 days at the time a new rental charge is issued are removed from the sample tracking sample. Unpaid units refer to all units that have yet to fully satisfy their owed rents for a collection period. These unpaid units include units that have only partially paid their rent. As a means of reporting standardization, units with more than one monthly rent charge (E.g., rent paid weekly) are removed from the rent tracking sample.

Consumer debt rose to a record $17.1 trillion during the second quarter of 2023, according to the latest data from the New York Fed— underscoring both the effect of rising interest rates and the resolve of post-pandemic consumer demand. However, beyond the headline is seemingly a silver lining for the housing market: mortgage debt declined over the same period. Between Q1 and Q2 2023, overall consumer debt rose by $16 billion, while mortgage debt alone fell by $30 billion. Still, while stable mortgage balances are helping the housing market avoid a 2007-style scenario, it also signals the burden of rising home-financing costs while masking the risk of mounting credit card debt. Overall, mortgage debt is down as new originations slow, which, as older loans mature, results in a net negative in total volume. In terms of the Fed’s monetary policy goals, this is a welcomed development— a slowdown in homebuying demand is needed to tame inflation. After all, shelter costs accounted for 90% of the increase in the CPI in July. Still, falling debt levels are proof that homebuying demand has slowed as housing prices remain sticky and credit conditions tighten. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage is up 1.74 percentage points from one year ago[1] and continues to hover near 20-year highs — keeping many would-be homebuyers on the sideline. While deleveraging in the housing market is a welcome development for economic stability, mounting credit card debt balances present a fresh cause for concern. According to the New York Fed’s report, credit card balances are up 4.6% quarter-over-quarter, rising by $45 billion to $1.03 trillion in Q2. Steady consumer spending levels are being amplified by inflation pressures, partially explaining the sharp increases. Still, in a worrying sign, the four-quarter average for credit card delinquencies rose to an 11-year high. While economists at the New York Fed noted that today’s delinquency rates are roughly in-line with pre-pandemic levels, even as inflation slows, generationally high-interest costs mean that consumers, on average, will take longer to pay down their debts. The burden will likely also be more widespread. According to an analysis by Liberty Street Economics, there are roughly 70 million more credit card accounts open in 2023 compared to 2019, while roughly 69% of all Americans have at least one credit card— a substantial ten percentage points higher than a decade ago. Widespread and indefinite debt financing may force would-be homebuyers to delay purchases further into the future or enter the market with less-favorable credit scores. Evidence of these constraints appears in the Federal Reserve’s Survey of Household Economics and Decision Making, where the share of adults reporting that they can pay their monthly bills in full fell by four (4) percentage points in 2022 — the largest single-year drop off since the survey’s 2016-inception. Nevertheless, to date, there is little evidence of systemic financial stress — especially if recent consumer spending levels are any proof. However, the resumption of student loan payments this Fall will test consumer demand in ways unseen since the beginning of the pandemic, while tighter credit standards have rasied the bar for would-be borrowers. Will the housing market blink? [1] Data is calculated based on the average rates from 08/11/22 and 08/10/23.

Presented By Key Takeaways The on-time payment rate in independently operated rental units held flat in July, remaining at 81.8%. Compared to a year earlier, the on-time payment rate remains up by 105 bps. The July 2023 forecast full payment rate is 91.9% — just 65 bps below its post-pandemic peak. A handful of western states hold the highest on-time payment rates in the country, led by Oregon (90.1%), Arizona (88.3%), Washington (87.6%), California (87.4%), and Colorado (86.4%). Single-Family Rental (SFR) properties held the highest on-time payment rates of all sub-property types in June, coming in at 82.1%. National Overview On-time rental payments in units operated by independent landlords remained effectively unchanged in July 2023 from the prior month. As of this month’s preliminary estimate, 81.8% of tenants in independently operating rental units have completed their monthly payments on time. The on-time payment rate is down by a marginal five (5) bps from a month prior. While the July 2023 on-time payment sits 294 bps lower than the high watermark set in March (84.2%), it remains up year-over-year by 105 bps. On balance, despite on-time payment rates moving slightly lower in recent months, current collection trends constitute healthy performance. Most encouragingly, July’s forecast full-payment rate, which takes on-time payments, late payments, and expected late payments based on historical trends, improved to 91.9% — increasing 42 bps month-over-month. Further, compared to March 2023’s peak full collection rate (92.5%), July’s estimate is down by only 65 bps. Overall, these data underscore how the rental housing sector has fended off widespread distress. So long as the cash flow ecosystem between tenants, operators, and lenders stays intact, owners will remain in a position where they can wait out the current interest rate climate and allow for pricing to recover. Given the impact of higher interest rates, incoming buyers have higher yield requirements for deals to make sense. At the same time, most existing asset owners are locked into rock-bottom interest rates secured over the past few years. The net result of the above is that fewer trades are occurring. In a scenario where rent collection rates were lower, there would invariably be more distressed sales. Data Findings: By Property Type Data Findings: By State About This Report The Independent Landlord Rental Performance report is a real-time look at how well non-institutional operators are collecting owed monthly rental payments. Utilizing data provided by property management software RentRedi, these findings have a reduced sample size of 53,963 units, which are analyzed and reported by Chandan Economics. Where sample size quality meets sufficient reporting standards, data are offered from March 2020 forward, and new trends and analyses are reported monthly. Performance trends are discussed nationally, as well as along the lines of residential property type and geography. Data contained within this report offer investors, brokers, academic researchers, and policymakers a benchmark to track the performance and health of independent landlords. About: Chandan Economics Chandan Economics is an economic advisory and data science firm serving the commercial real estate industry. The firm's primary businesses include real estate data science (REDS), economic & market research, and litigation consulting. About: RentRedi RentRedi is a property management software that saves landlords time & money by empowering them with tech to manage their rentals—all from the palm of their hand. For landlords, RentRedi provides all-in-one web and mobile apps to collect rent, list & market vacancies, find & screen tenants, sign leases, and manage maintenance & accounting. RentRedi has partnered with platforms including Plaid, REI Hub, Latchel, TransUnion, TSYS, Sure Insurance, and Realtor.com, and Doorsteps to create the best experience possible. For tenants, RentRedi’s easy-to-use mobile app allows them to pay rent, set up auto-pay, report rent payments to credit bureaus, prequalify & sign leases, and submit maintenance requests Methodology Data are reported on a forward basis from March 2020 through July 2023 (current reporting period). As of the latest month of data availability, the reduced unit sample size totals 53,963. Rent charges are measured on a 15th-to-15th-of-the-month basis. Rent charges that are issued after the 15th of the current month are treated as a rent charge for the following rent-tracking period. (E.g., a rent charge sent on June 16th would be treated as a charge corresponding to July's owed rental payment.) Only charges designated as "rental income" are included for analysis. Rent charges below $500 and above $10,000 are excluded from this analysis. Units that have not paid any form of rental income (full or partial) in the previous 60 days at the time a new rental charge is issued are removed from the sample tracking sample. Unpaid units refer to all units that have yet to fully satisfy their owed rents for a collection period. These unpaid units include units that have only partially paid their rent. As a means of reporting standardization, units with more than one monthly rent charge (E.g., rent paid weekly) are removed from the rent tracking sample.

Across the top 10 US cities by population, a growing share of commuters are utilizing private vehicles as their primary mode of transportation. In the five years ending 2021, eight of the top ten metros saw higher rates of private automobile utilization for commuters getting to work. With its dense public transportation network, New York City maintains the lowest share of automobile commuters (65.3%) amongst the major metros by a wide margin (21.3 percentage points below the next metro, Washington, DC). However, New York also saw the most significant jump in the private automobile share of commuters over the past five years of data. Between 2016 and 2021, 7.0% of New York MSA commuters shifted from public- or micro-transit solutions to private automobiles. Following closely behind and also seeing sizeable shifts towards driving to work were Washington, DC (+6.9%), Chicago (+5.6%), and Philadelphia (+4.5%). Only two tracked metros — Dallas (-0.4%) and Houston (-0.6%) — saw a declining share of commuters getting to work via private automobiles.

As of the preliminary June estimate, 82.6% of SFR units have paid their rent on time this month, declining from May’s 83.0% by 38 bps. After topping out at 84.3% in March, the SFR on-time payment rate has now fallen for three consecutive months, sliding by 168 bps. However, cause for alarm remains low. Compared to one year ago, June 2023’s SFR on-time payment rate improved by 90 bps. Considering the forecast full payment rate also indicates that SFR rent collections remain on stable ground. The forecast full payment rate, which includes on-time payments, late payments, and expected late payments based on historical patterns, topped out at 92.8% in April. Through June, the forecast full payment rate remains up at 92.3%. The SFR full payment rate eclipsed 92% for the first time post-pandemic in November 2022, where it has remained for nine straight months. For more, see the June 2023 Chandan Economics-RentRedi Independent Landlord Rental Performance Report here: https://www.chandan.com/post/independent-landlord-rental-performance-report-june-2023.