10.2: It's Not A Cap Rate, It's The Unemployment Rate
November 06, 2009
Unemployment exceeds double digits and this will affect cap rates.
The October unemployment rate hit double digits or 10.2%, but the reality is, it's much higher: this figure does not account for the people who stopped looking and it does not account for under-employment.
Drive down the street and just think that one in 10 around you does not have a job: that brings it into more perspective. Last time the number was so high was in 1983 and I was in the United States only 1 year, fresh from Poland via Austria and the oppression of the communists.
I now know 10%, I also know 17% and I know 30% unemployment, not directly, but via my family and friends: not in the United States, but in Europe, in the 1980's before communism fell and especially after shock therapy of the free market, when there was no money for unemployment benefits in the governments coffers.
That was a nasty
time:
a time of uncertainly and much pain, especially for the older people
who could not adjust to the new economy which required a college degree
and the ability speak multiple languages even for remedial jobs: it's
was competitive, not to mention the fast arrival of the digital economy which left even more people behind.
Here I know it too, lots of people I know are without work. I also know it from many of my tenants and I see how it trickles throughout the economy from the bottom to the top and back. We've lost quite a few tenants because they lost jobs: they often moved to smaller apartments or consolidated: move in with friends or family.
One of my good
residents lost his job as a teacher. He was looking for a job 8 months
and stayed in the apartment until finally he had to move in with family:
with no job and no room he had to sell off much of his beautiful
decorative pieces at a yard sale for pennies.
For some the rents were adjusted, and for us as owners the cost of doing business increased, so we offer less the our handyman or the yard people and try to hold off on none essential property improvements.
