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To most of the world, summer means happy times and sunshine but to those in Property Management, it means go time! Summer is the busiest time of the year for move-outs and new leases and here at Frontline Property Management, Inc., we look forward to the challenge!
As summer kicks off we have seen our typical surge of rental applications roll in. As mentioned in our May newsletter, a larger than normal amount of the applications received contain forged income verification. We have taken many steps to combat this uptick in forged documents, however, we are hoping to see an end to this increase with the expiration of the additional unemployment benefits on June 26th.
Though most of the summer kick-off has been business as usual, we are experiencing an uncommon (and completely unbelievable to us native Texans) amount of rain. With this uncommon amount of rain has come uncommon issues for Texas property owners! From roof leaks to flooding and water irrigation issues we have your back! We are taking any preventative steps available, but if any issues should occur at your property your Frontline representative will be in contact with you to present the best solution and course of action!
Even in the midst of the summer rush Frontline Property Management, Inc. will continue to monitor and provide updates on COVID-19 related events relevant to residential real estate investing!
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The Texas Rent Relief Program
Back in March, we provided you with information regarding the rollout of the Texas Rent Relief Program. As of 6/8/2021 Frontline has successfully helped our tenants collect a total of $157,344.35 in assistance from the program!
While this has helped clear past due balances, a good portion of these funds have been allocated to prepaid rent which means that tenants will be able to catch up on the other financial responsibilities that they have fallen behind on without falling behind on rent.
We are still working with numerous others and expect this amount to increase exponentially before the expiration of the program on 9/30/2021.
Click here for more details on the Texas Rent Relief Program.
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CDC Eviction Moratorium
If you have been following our past newsletters, you are aware that on February 25th, 2021 U.S. District Judge John Barker issued a ruling stating that the eviction moratorium issued by the CDC surpassed the federal government’s constitutional authority. Many others have followed suit and ruled in a similar manner, including U.S. District Court Judge Dabney Friedrich.
Unfortunately, the DC Court of Appeals has issued a ruling that allows the federal eviction moratorium, originally set to expire on June 30th, to remain in place while the government appeals an earlier ruling that vacated the moratorium.
Click here to learn more about the DC Court of Appeals ruling.
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Jay Hartley MPM®, RMP®
Owner - Managing Partner
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Office | 817.377.3190
Direct | 817.288.5546
Frontline Property Management, Inc.
3000 Race Street, Suite 132
Fort Worth, TX 76111
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Current COVID-19 Impact Projections on Texas' Economy
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Based on data through May 22, 2021
The Texas Weekly Leading Index increased the week ending on May 22, increasing for two straight weeks (Figures 1 and 2). The index has been gathering impetus and is pointing toward higher future economic activity as the reopening of the economy continues, and the uncertainty regarding the pandemic dissipates due to increasing vaccination rates.
The index's increase was mainly due to a decrease in the number of people filing for unemployment insurance, and it was offset by a decrease in the number of new business applications. Even though the number of new business applications fell, the number remains high, signaling business activity remains strong.
Initial jobless claims in Texas decreased the week ending May 22 to 22,199. This marks eight straight weeks of drops and the lowest level of initial unemployment claims since before the pandemic. Continuing unemployment claims decreased to 219,504 the week ending May 15, recording two straight weeks of declines and the lowest level since March 21 when the pandemic hit the economy. The levels and decreases in both initial and continuing unemployment claims indicate the labor market is getting closer to pre-pandemic levels. However, the Texas economy still needs to gain almost 446,000 jobs to return to pre-pandemic levels. Anecdotal evidence from service sector businesses points toward the lack of available applicants and generous unemployment benefits as major impediments in rehiring workers. To eliminate the incentive of remaining unemployed, Texas will opt out of further federal unemployment compensation related to the COVID-19 pandemic effective June 26, 2021. The measure will reduce minimum unemployment payments from $19,240 a year to $3,640 a year.
The outlook for the reopening and recovery of the state's economy improved as the number of cases continued trending downward up to the week ending May 22 (Figure 3). In addition, vaccination rates are increasing. This is benefiting consumer behavior, increasing business activity while reducing the number of layoffs going forward and allowing people to return to the labor force.
In addition, a slight decrease in the real rate for the ten-year Treasury bill (which continues to exhibit a negative return in real terms) contributed to the increase in the weekly index. In contrast, a decrease in the real price of West Texas Intermediate (WTI) oil offset the increase in the index.
Although this is becoming less likely, the rebound in Texas' economic activity could be hindered by possible upsurges in COVID-19 cases as economic and social activity increases. Further waves of infections can reverse increased mobility and spending, affecting the path to recovery.
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About This Report
The COVID-19 health crisis is unlike any crisis the economy has experienced before. The economy is currently going through a self-induced, sudden-stop to contain and stabilize the spread of the virus and save lives. The size of the economic shock will likely result in losses that overshadow losses from the 2008-09 financial crisis.
The Texas economy is not immune to the pandemic. In fact, the state's economy will be hit even harder than the world and the rest of the United States due to the simultaneous downturn in the oil industry.
This crisis has created a need for up-to-date economic indicators that can help forecast economic changes. The Real Estate Center at Texas A&M University has constructed a high-frequency economic activity index for Texas that estimates the timing and length of future upswings and downturns on a weekly basis.
New weekly data series (also called high-frequency data) and new methodologies to seasonally adjust the data on a weekly basis have allowed for the development of weekly coincident and leading economic indicators. The Center has a successful track record in estimating monthly residential and nonresidential construction leading indexes for Texas. Both indexes have proven useful in signaling directional changes and forecasting key indicators like single family home sales, apartment vacancy rates, and commercial vacancy rates.
The Center evaluates economic data to determine:
- economic significance,
- statistical adequacy (in describing the economic process in question),
- timing at expansion and recessions,
- conformity to historical business cycles,
- smoothness, and
- currency or timeliness (how promptly the statistics are available).
However, the indexes do have some weaknesses. Underlying indicators are subject to revision, and while errors often cancel out across indicators, revisions impact the index and future monitoring of business cycles. In addition, although leading indicators often show the direction of a business cycle, they do not measure the magnitude of the change.
Even with these caveats, leading indicators are useful for measuring business cycles. Seven variables were evaluated for this report. Four (business applications, high-propensity business applications, business applications with planned wages, and business applications from corporations) are business market variables that are tied to state business activity. One variable, weekly initial unemployment insurance claims, is tied to state employment. Another, West Texas Intermediate (WTI) real oil price deflated by the all-urban consumer price index, is related to the oil industry. The last variable, the real ten-year Treasury bill estimated using same-period inflation expectations, represents the cost of credit in the economy.
Based on statistically reliable criteria, four variables were selected as economic activity leading indicators: business applications, initial unemployment insurance claims, real WTI oil price, and real ten-year Treasury bill. These variables demonstrated a significant leading relationship with Texas nonfarm employment. All other variables were found not to be statistically valuable or to perform below the business applications variable for the leading index.
Detecting turning points in any leading index on a month-to-month basis is difficult because not all downturn (upturn) movements point toward recessions (expansions). It's even more difficult to do on a weekly basis. The Center has converted the weekly leading economic activity index into a monthly leading index to evaluate its predictive usefulness.
Based on the National Bureau of Economic Research methodology, Texas nonfarm employment and the Dallas Federal Reserve Texas coincident indicator are used as references of peaks and troughs to measure the state's business cycle (see table). This makes it possible to see if the weekly economic leading indicator can predict changes in Texas business cycles.
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The Texas weekly leading index signaled a directional change in October 2007, 11 months before the prolonged downturn in employment that started in August 2008. Similarly, it signaled a recovery turning point in February 2009, 11 months before employment turned toward recovery in December 2009.
In addition, it predicted turning points and duration of expansion and contraction more accurately than another institution's leading indicator–the one produced by the St. Louis Federal Reserve (Figure 4).
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Overall, the leading index is regarded as a good indicator to predict turning points in Texas employment, even leading both the Dallas Federal Reserve's coincident and leading indicators for the state's economy.
One major problem in evaluating the index was the short time period. For a more accurate evaluation of business cycle relationships, it's best to study the relationships over many business cycles. Because the predictive ability of the leading index was evaluated over a short time, it's possible that the relationship might not hold in the future. Thus, the leading index for economic activity will be best evaluated based on its ability to lead Texas employment in the future.
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Source: Dr. Torres is a research economist with the Texas Real Estate Research Center at Texas A&M University.
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- Texas jobs increased modestly during April, recording gains in 11 of the last 12 months.*
- Texas added 13,000 jobs during April, increasing 0.1 percent over March. However, its growth rate was lower than the nation's 0.2 percent.*
- Due to the jobs gained during April, the Texas economy now needs to gain almost 446,000 jobs in the coming months to return to pre-pandemic levels.*
- For the remainder of 2021, employment will benefit from increasing vaccination rates and a further round of federal government stimulus. This will allow the economy to fully reopen, benefiting services that cannot socially distance, such as leisure and hospitality.
- During April, the Texas unemployment rate fell to 6.7 percent with respect to the previous month. The state had a higher unemployment rate than the nation's 6.1 percent. The unemployment rate has a long way to drop to reach pre-pandemic levels of 3.7 percent.*
- The states' labor force increased 662,969 from April 2020 to April 2021 due to more people joining the labor force, but it still needs around 151,309 to reach pre-pandemic levels.*
- The longer people are out of work, the harder it is for them to find new employment as skills become inadequate. This can be reverted if programs are created to help retrain of marginalized workers.
- Women in the 25-to-34-year age group were more likely than men to leave their jobs to take care of children because of in-person school and daycare closures; this outcome should be reverted once schools and daycares return to in-person learning and caregiving.
- Anecdotal evidence from service sector businesses points toward the lack of available applicants and generous unemployment benefits as major impediments in rehiring workers.
- To eliminate the incentive of remaining unemployed, Texas will opt out of further federal unemployment compensation related to the COVID-19 pandemic effective June 26, 2021.
- The measure will reduce minimum unemployment payments from $19,240 a year to $3,640 a year.
- The labor force participation rate dropped slightly in April 2021 and continues the downward trend that began in June 2020.*
- The mining and logging industry registered an annual decline from Aprril 2020 to April 2021. It is the only sector that continues to register annual declines due to the contraction in the oil industry during the pandemic.
- Expectations for 2021 are for the industry to improve as the pandemic is brought under control at the end of the year, allowing the economy to reopen completely and for the global and U.S. economies to rebound from the pandemic.
- However, prices in the $50-$60 range will not be enough to create significant employment gains or overall economic improvement.
- In addition, the incoming administration's clean energy policy will be a major headwind for the industry.
- The leisure and hospitality sector registered both the highest monthly and annual growth rate in April 2021, but it still needs to gain 168,800 jobs in the coming months to return to pre-pandemic levels.*
- The state's goods-producing sector registered losses of 17,500 jobs from March 2021 to April 2021. The majority of the losses came from the construction industry, which lost 13,600 jobs.*
- Transportation, warehousing, and utilities and financial activities continue to be the only two sectors that have recovered all the jobs lost due to the pandemic.*
- Due to the strong presence of the oil industry in Odessa and Midland, both MSAs registered the biggest declines from April 2020 to April 2021 and are the only two metropolitan areas that continue to register negative annual growth.
- Even though the oil industry is expected to improve in 2021, it will probably not be enough to create significant employment gains or overall economic improvement if oil prices are $50-$60 a barrel.
- Austin registered the highest annual growth rate of all Texas metropolitan areas from April 2020 to April 2021, benefiting from its substantial high-tech sector, which can socially distance and has prospered through the pandemic.
- El Paso registered the highest annual growth rate of the four major Texas border MSAs from April 2020 to April 2021.
- Waco continues to be the only metropolitan area to have recovered all the jobs lost due to the pandemic.*
- Government registered both positive monthly and annual employment growth rates due to an increase in both federal and local government employment, while government revenue has been hit hard by the pandemic.*
* Analysis based on seasonally adjusted labor force numbers and unemployment rates.
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Disclaimer: This is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Consult with your own attorney, CPA, and/or other advisor regarding your specific situation.
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