Dear Friends and Family,
The arrival of summer brings a new sense of (still cautious) optimism, for both the pandemic outlook and the real estate market. Rental prices in Los Angeles and other US cities are steadily increasing and returning to pre-COVID levels. However, there are some critical trends to be mindful of. As the pandemic begins to wane, so too do federal protections for renters against eviction. Property owners look to an uncertain future as well, as President Biden considers eliminating the 1031 Exchange program in order to fund social services.
LA One-Bedroom Rent Climbs Again in April After Year of Declines
April marked the second consecutive month that one-bedroom median rents posted gains, rising 2.6 percent from March to $1,960, according to the latest report from apartment rental platform Zumper. Compared to the same period last year, one-bedroom rent is down 10.9 percent, equating to a price difference of $240 per month…“As more Americans become vaccinated, 2020 rental market trends could reverse rapidly,” wrote Zumper data analyst Neil Gerstein, who authored the report. “Specifically, more Americans may consider moving back to expensive, coastal markets, which could increase prices in these places after a year of historic decreases.”
Multifamily Rents Record Largest Post-Pandemic Rise Yet, Per Report
Rental increases for the month were particularly strong in gateway markets, pointing to renewed demand in places previously hit hard by the pandemic. Of the top 30 U.S. multifamily markets, 24 experienced month-over-month rent growth of more than 0.5% in April. That growth represents a turnaround for many markets that had experienced soaring pre-pandemic rents that fell rapidly because of the crisis.
Judge Strikes Down Federal Eviction Ban
U.S. District Court Judge Dabney Friedrich wrote in an opinion that although the pandemic is a health crisis, the Centers for Disease Control and Prevention lacks the legal authority to ban evictions. The order does not supersede statewide moratoriums, such as New York’s statewide ban on evictions extended by legislators Monday through Aug. 31. Likewise, a ban in California covers renters until June 30, which is when the CDC moratorium was to sunset before the judge vacated it.
Biden’s Proposal to Cut 1031 Exchanges May Be “Tremendous Blow” to Real Estate
The proposed change to IRS Section 1031 — which would affect real estate investments where the profits exceed $500,000 — is part of Biden’s $1.8 trillion American Families Plan, which targets several longstanding tax loopholes to fund early education, direct payments to families with children and more. But some experts believe losing like-kind exchanges could be more harmful than helpful. Targeting 1031 exchanges reflects a “misguided view of the actual purpose and benefits of like-kind exchanges,” said Suzanne Baker, general counsel for Investment Property Exchange Services and co-chairperson of the Federation of Exchange Accommodators.
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As always, please respond with your questions, comments, and thoughts. Until next time, hope you have a great rest of your day!