Where are the renters going to go will market get crushed

[Jay Hinrichs]

So was listening to an economist today that specializes in working with REITS and other top players in the industry

he got on MF

His point was as things shake out..  A and B rents will go down  and C renters will leave to live in nicer units putting pressure on lower end rentals  Cap rates go up on the nicer stuff  and well values drop across the board.

I wonder if we will see that in SFRs as well..  if there is competition for tenants  ??  rents go down people paying 800 all of a sudden can move to a nicer home.. the 800 rent gets lowered to 600 so its not vacant.. ??

if this does come to pass I suspect landlords want to do everything they can to keep their existing tenants. ?

[Jonathan R McLaughlin]

@Jay Hinrichs classic economist mistake of assuming frictionless transactions.  Most people don't move between B and A's or Cs and Bs the way they model. Increasingly in America there is less and less economic mobility and markets are becoming very separate.

There almost has to be deflation in rents across the board as people stagger through this, though. And I think a lot of the REIT investment money has been in transitioning properties up the food chain, and that may be a less attractive bet. And there was nowhere for all the money to go, so real estate went from a safety play with dividends to mad growth in a low interest rate environment. Gonna be harder to model those great returns!

The magazine "Seeking Alpha" (hedge fund trade) has REITs of all types down 47% right now, so lots of these guys are coming up with new theories on the fly. Some will be right. Interestingly, industrials only down 1-2% and data center REITS up 14%....after that its carnage across the board.