THIS Is the Start of a Full-Blown RENTAL COLLAPSE

The rental crisis is getting even worse. Not only are rent prices dropping month over month, but people are actually just stopping paying their rent altogether to their landlords. And this is a new phenomenon. And we're going to dig into the data and figure out what this means for the economy.

What does this mean for real estate? What does this mean for investors moving forward? Because a lot of their models are based on what they can charge people for rent. And they're getting really hurt.

And you know, renters are probably applauding this, but and investors are just freaking out at this point. So here's the report that comes from Chanden Research, which shows that late rental payments from all property types have jumped from 8.5 to 117% 3.2% since 2024. Looking at analysis, United States, there's approximately 115 million renters across the United States and the number of rental units is about 46 million that are occupied. And it's assuming that large operators have the same percentage of late payments.

We could be looking at more than 1.47 million of units paying late rent since 2024. Now, that's a lot of people. And the fact that it's getting worse is really interesting because people stop paying their cars. They stop paying their credit cards, but the last thing they usually stop paying for is their rent or their shelter payments.

And now we're actually seeing that distress show up very quickly within a short period of time. So, it's going to be really tough watching the market moving forward because, you know, vacancies are actually increasing as well. So, let's dig into why this is all happening. Here's an inverse chart from Chanden Economics that shows, you know, the same thing just kind of inverted.

Independent operating landlords on time payments is falling. Okay, so people are paying late on their payments or not paying rent at all. Where is this pain being located? It's mostly in the southeast.

You can see, you know, Georgia, Mississippi, Tennessee, and and Florida actually has a ton of late payments um as well. And it's getting brutal out there. And so you can see like the darker red means that they have more on-time payments. And these colors, the lighter colors here mean that there's uh more late payments.

So, it's getting brutal out there. The consumer is freaking out. Uh, this is a report that comes from Liz Anne Saunders and it just shows the financial situation is getting worse and worse and there's really no end in sight. This actually is just the beginning of kind of a consumer crisis due to affordability issues and we're actually seeing, you know, inflation still remaining high at 2.9% since the last report last Friday.

Now, what has happened and how did this all happen so quickly? Well, prices skyrocketed, you know, from 2020 to 207% here in Florida. You can look across the country. Housing prices just jumped as the Fed came in and basically had their zero interest rate policy and investors and speculators jumped in and pushed prices up of absolutely everything across the board where it became unaffordable for renters to buy.

In a lot of cases, the locals got priced out. Now, here's an interesting chart that also shows rental vacancy levels are increasing from a from apartment list national vacancy index. They're increasing. Okay?

So, we're actually higher now than we were in 2020. And people are doubling up. They're staying in the same house. They're staying in their parents basement because they can't afford the cost of rent.

They can't afford to buy a house. So, they have to double up or go live with their parents. And this is this is going to be really bad moving forward. So, not only are people paying rent late or not paying at all, the rents are dropping themselves.

So, another study showed a 6% decline across the United States from 22 to 2024. Now, obviously, it's worse than that in specific areas. I can tell you here in Jacksonville, we have already seen from the peak in 2022 a drop of up to 20% in specific areas. And it keeps getting worse every single month as inventory just jumps on the market month after month.

Here's a report that shows Jacksonville rent prices have dropped 6% in the last year. That's just one year. And the thing you need to understand about real estate is it moves slow. So a 6% drop might not sound like much, but it's it's huge in the scheme of things because if it continues at this rate for a couple of years, it could really destroy investors.

It's really good for renters if you're looking to rent, but only if the renter is a good tenant and they actually make their payment. I'd love to hear from you. Do you think rent prices in your area going to go up or down in the next 12 months? Drop your information in the comments.

My projection is that rent prices will be coming down quite significantly here in Florida as inventory continues to creep on. And one thing you got to keep in mind is there's entire communities that builders are unable to sell and now they're just selling them to build to rent operators. So now they have these new construction communities that are all basically rentals and it's like just pushing so much supply on the market at one point in time that it's bringing rent prices down. There's nothing that can happen.

In Florida specifically, we've seen a relocation slowdown. They're down about 80% from the peak in 22. The multif family overbuilding is just insane. And then the affordability crisis, the locals are completely priced out.

And now what we're seeing is sellers who bought in the last two years who want to move and want to rent out their properties, they can't rent them out. They're underwater because their monthly payment is higher than what they can rent it for. And they're not willing to lose five, six, seven, eight thou $800 per month. And so they're they're basically going to short sale.

And so this is a problem. When rents drop, that alternative becomes unavailable to them if they're underwater on their house. And so here's the reality of it. Buying a home in 2025 costs 43% more than renting one.

This is crazy. Look at this chart. I believe this comes from realtor.com, but it's just it's we're way beyond uh the realms of continuing this bull market that we've had for the last 14 years. It's just not possible when the opportunity cost is I can actually rent for something so much more cheap.

The same exact product I could get a mortgage payment for. Maybe I can get for five, seven, $800 less if I just rent that same house and don't have to deal with the cost. Now, what happened? The cost of buying a house and the mortgage just skyrocketed.

Here you can see it's up, you know, basically 90% over just a couple of years uh since the 2020 time period. And it's just because prices have just exploded. Monthly payment 90% increase in five years. This is a good way to look at it.

You can kind of see how it's just gone from 1,500 on average to uh basically 28 uh63, which is insane. We've never seen anything like this in such a short period of time. We basically packed in, you know, 5 years of growth ba, you know, for for like a 50-year period. It's just out of control.

Now, here's the rule of 28. This basically shows that we need uh $841 drop in payment to match the 28% rule. A 28% rule is the amount of uh money that should be going to your shelter costs as a percentage of your income that you have. And so you could see that there's a huge disconnect here between the two.

And so, you know, when I do my models of investment properties, it looks like to me for investors to jump back into this market for them to make sense to even buy a rental, prices would need to come down a minimum of 31 in a in a possible 42% from the peak in October 2022. Now, we are already down about 10% here in Jacksonville. So, we're in a technical um correction. A rec a crash would be 30% from the peak, which I expect to happen here locally within the next 48 months, right?

Because real estate does not transact right away. It takes time for that to happen. But a lot of that distress is going to happen from these investors who are speculators who are now stuck holding these properties that are outdated. They're not in good condition and they're trying to rent them out.

They they get scared because the rents are going down. They try to sell them. They can't sell them bec because they're out of date and they have to take a massive price drop and they lose all their equity and sometimes in a lot of cases more than that. So what are the tenants doing?

They're being smart, right? They're renegotiating leases. They're asking for uh free months rent. The um power is absolutely with tenants now, even though a lot of them aren't paying.

But if you're a well-qualified tenant with cash in the bank, this is really great. And we expect this to level off over time. But this rent crash is basically what's causing in part in addition to mortgage rates going up, the reason why investor purchases are down 62.8% from the peak. I mean, if you expect rents to drop, how can you pay today's prices?

It's just crazy. I mean, you could look at the investor purchases of Q2 2021. This comes from Red Fin versus investor purchases of Q1 2025. I mean, investors just are not able to purchase anymore.

The the idea that rents will continue moving up and prices will continuing up. That story is no longer available here in in Florida in general and especially not here in Jacksonville. You can see also Atlanta, Georgia is having the same issue. Phoenix, Charlotte, Nashville.

The areas that benefited the most from the 2022 ZERP policy from the Fed are the areas that are and had the most speculation are the areas that are now getting hit the hardest. Now, that's no different on the Airbnb side, right? Inventory is going up across the board. Not only are rental inventories going up, but short-term rental inventories are going up.

The amount of properties available are going up, and the the listings on the short-term rentals have skyrocketed. This chart blew me away. 75% in listings since 2021 which is hurting the Airbnb market and their occupancy level is then dropping. So again this is the most scary thing is once these builders start building it takes about two years to complete a cycle on multif family in a lot of these communities uh you know another phase is the inventory just keeps stacking and I can tell you right now they are still building.

You can drive around the city and you can see every single community continue to build because they need to finish their project because they already broke ground. They have the contractor agreements. They have the lending already set up. So, the new homes for sale in the south are already worse than the great financial crisis level and we expect them to continue moving up.

A lot of them are trying to get out as soon as possible to not lose money and break even. We're seeing stuff that builders were selling for $500,000 that are, you know, they're selling to investors for $300,000 just to get their money back out of the deal and to walk away from it. So, but those will be turned into rentals, right? So, a lot of those won't be resold anytime soon.

They're going to be turned in, that's the plan for them, and that'll bring a ton of supply of rental inventory into the market. Now, this is another deeper chart. Look at the blue has as many um new home inventory under construction not started and then the completed ones and it's just moving up in all directions. This is all the way up to January 2025.

I I look forward to getting an updated chart for you guys. But frankly, a picture says a thousand words. Look at this. This is already what Jack You can barely see the word Jacksonville.

This is what the chart looks like for active inventory. I can tell you the first thing a seller does is they contact us. They want a rent analysis. They find out that the rent is not as high as they thought they could get for the rental and then they try to sell it.

They can't sell it because it's outdated and then they have to short sale it. They have to like stuck in this decision, this financial decision because there's no good way out except to fire sale the property and get out of it because the rental income won't cover their mortgage payment, especially if they bought 2022 through 2025. And this is a huge problem, especially because we see rents going down. And we're seeing rentals not only go down, but they're sitting vacant for like three to four months before they're getting rented out.

I mean, that just kills your entire profit because you still have to pay the mortgage payment during that. So, in some rental market is completely overbuilt in the south. Uh consumers not paying rent is increasing, which is very scary. Uh vacancy is increasing.

The consumer is completely maxed out. You can already see the distress from the credit card market and the auto market delinquencies which are already near or over the great financial crisis levels. So I'd love to hear from what you what you're seeing on the ground. Are you seeing distress from friends?

Are you seeing people doubling up in their houses because rent's too expensive and they can't afford to buy? Love to hear from you. And as always, if you have any questions, shoot me a message. I love chatting with the audience here.

Uh my email's down below in the in the notes and you can always subscribe to my Think Big Question Everything Substack. We have about 27,000 subscribers, so you can always get up to date with the new charts that come out each week and our take on it. So, love to hear what's going on in your world. Drop a comment below and a like.

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