The country may still be split on the economic bailout plan, but some apartment executives?always wary of unemployment numbers?hope to see the House pass the Bush administration's $700 billion rescue package. The Senate passed it yesterday.
Though M|PF YieldStar reports that industry-wide rental occupancy rates still remain relatively stable at approximately 94.5 percent, there is an underlying fear among many owners and managers that the levels can't last. If the bailout doesn't happen soon, that drop could be steeper and happen sooner than the market could bear.
"Maybe with the bailout, it's just a mild recession," says David Schwartz, principal of Waterton Advisors, an apartment owner and operator based in Chicago. "If it becomes worse and we see substantial loss of jobs and an economic slowdown, that benefits no one. Let's hope the bailout goes through, and there's only a mild recession."
But some apartment executives are already seeing softening. "In the last couple of weeks [after the Fannie Mae, Freddie Mac, and AIG bailouts], we've seen traffic slow," says Cindy Clare, president of Kettler Management, an apartment builder, owner, and manager with 12,000 units in the Washington, D.C., area. "People are holding off on making decisions because of everything that's going on in the economy."
Brian O'Neill, founder and chairman of O'Neill Properties Group, a multifamily builder and owner based in King of Prussia, Pa., sees much the same. "People are apprehensive. They're afraid," he says. "They watch the $700 billion bailout, and the young people that would normally rent a new apartment now think, 'Maybe I'll stay at home and see how things shake out.'"
Clare, for one, thinks the bailout could be a boon for the relatively steady D.C. market. In her 20-plus years in the area, she's learned that increased government spending usually means better occupancies in her Washington, D.C., metro area properties. "If anything, with the government bailout, we'll probably see more government jobs," she says. "That tends to help our market."
Elsewhere, the prognosis isn't so bright?with or without the bailout. Schwartz is hopeful the bailout will help, if it passes. But he's knows it's not a cure all. "It's important, but that doesn't guarantee things don't continue to decline," he says. "Whether the bailout happens or not, my biggest is concern is that this could become a deep recession."