Demand for apartment living has declined mainly in urban areas like downtown Chicago. The return to normal for downtown rentals will be slow.
22-Mar-21 A year ago, before the pandemic, Chicago renters were flocking to luxury downtown high-rise towers because apartment dwellers yearned to live in the urban heart of the city close to jobs, great restaurants, entertainment, and high-end retail shops.
When the COVID-19 pandemic upended urban living last March, however, hundreds of restaurants, shops, bars, and theaters shut down. At the same time, major corporations stressed a work-from-home business model, reducing the number of employees working from downtown offices during the day.
Realtors say there still is strong demand for rental units in walk-up buildings with outdoor space, especially in lakefront neighborhoods such as Old Town, Lincoln Park, Lakeview, Edgewater, and Rogers Park.
In addition, more young renters also are opting for renting in the suburbs, searching for the wide-open spaces that make social distancing and quarantining easier, rental experts say.
Demand for apartment living has declined more in urban areas like downtown Chicago, which relies heavily on mass transit, noted multi-family lender Michael Dury, president and CEO of Merchants Capital, which makes apartment loans in Chicago, Indiana, Minnesota, and New York City.
Not everyone will want to work from home permanently, Dury (left) told Midwest Real Estate News. People will want to live close by their jobs again.
The return to downtown rentals will be slow to return to normal, especially in Chicago, he said. He noted that demand is high for the suburban rental environment for apartment dwellers who can afford to make the move and who have kept their jobs during the pandemic.
Help from Uncle Sam
A whopping ten million apartment dwellers fell behind on monthly rent payments as of January 2021, reported the National Apartment Association. Help is on the way via the $1.9 trillion American Rescue Plan that was recently signed into law by President Joe Biden.
The plan includes a range of measures which will have a major impact on both renters and landlords. These components include $27.4 billion in rental housing assistance, an additional $300 per week in unemployment assistance through September 6, 2021, and one-time payments of $1,400 to those earning less than $75,000, and to couples earning below a $150,000 threshold.
The question is how long will it take to get those bucks into the cash-strapped hands of the nations apartment renters?
Home loan rates rising
On March 18, 30-year fixed loans averaged 3.09 percent nationwide, up from 3.05 percent a week earlier. A year ago, 30-year fixed mortgages averaged 3.65 percent. Meanwhile, 15-year fixed home loans averaged 2.40 percent, up from 2.38 percent a week earlier. A year ago, the 15-year fixed mortgage averaged 3.06 percent.
The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit.