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Zumper CEO on how coronavirus has impacted the rental market

Anthemos Georgiades, CEO and Co-Founder of Zumper, joined Yahoo Finance's The Final Round to discuss Zumper's latest National Rent Report and the top rental markets in the U.S. right now.

Video Transcript

SEANA SMITH: The coronavirus is sending the rental market in particular on a bit of a roller coaster ride affecting rents nationwide in pretty different ways. So let's talk a little bit more about this. And for that, we have Anthemos Georgiades. He is CEO and co-founder of Zumper. Anthemos, it's great to have you on the show. This afternoon I know Zumper just released its latest national rent report. So how is the pandemic affecting rent prices across the nation? And then what are you seeing as more and more states scale back their coronavirus-related restrictions?

ANTHEMOS GEORGIADES: Thanks for having me. Yes, I think as you saw unemployment numbers spike in the last three months, obviously there was a softness on the rental market. There was a downward pressure on prices. It's been felt in every state and every city. But it's being felt more in major Millennial metros for two reasons. One is New York and San Francisco have long had a long bullet-- bull run on the rental market. And prices have kind of topped $3,500 in San Francisco for a one bed. So it was kind of coming to an end.

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But secondly, as you've seen many tech employees go to remote work, we've seen a massive impact on Silicon Valley as people have decided no longer they need to live in these kind of very expensive metros. San Francisco rents are down 9% year on year. Mountain View rents next to the Facebook and Google campus, they're down 16% year on year. In the seven years of Zumper data, we've never seen anything like this.

So two trends compounding it. One is the unemployment numbers, the other is the move to remote work for a minority of the workforce.

MYLES UDLAND: And, you know, Ant, I want to talk a little bit more about San Francisco specifically. Two parts, first is, like, can you maybe put in context for our viewers how significant a 9% drop in rent prices are? Because, you know, the price of some things goes down 9%, everyone gets excited. But for someone who's renting out their apartment, that is not what's in your model.

And also, you guys are in San Francisco. What's the momentum like around people just kind of permanently going to these remote setups? Is this something that you guys are thinking about as a company? And is this really as big a cultural shift in SF and in the Valley broadly that-- that is not going to really go back?

ANTHEMOS GEORGIADES: 9% is enormous. We've never seen anything like it. And actually, month on month, it's larger. So month on month, rents were down 2 and 1/2 percent in compound if they went down that fast month on month four 12 months, that would be a 27% dip in San Francisco rent. So this is real.

Anecdotally, yeah, I'm the CEO of Zumper. We're based in Silicon Valley. We're the largest privately held apartment rental platform, so we see a lot of this. Anecdotally, I have many friends in the tech community who are not renewing their lease. They're going to stay at their company, but they're going to move to Arizona. They're going to move to Salt Lake City. They're going to move to San Diego. They're going to have half the cost of living and remain in their tech jobs.

And so as the CEO of Zumper, we think a lot about the future of remote work. And are we more open to remote work going forward? Absolutely, not just as a-- as a way to kind of fight the pandemic and be productive. But why would we constrain our talent searches to this seven by seven of San Francisco that we've looked at for so long? We can attract talent from all 50 states. And I think many CEOs in Silicon Valley have had their eyes open to this in the last three months.

AKIKO FUJITA: I'm curious about the methodology of this because we keep hearing about renters who are not able to make rent over the last few months. When you talk about the price pressures, how much of that has been actually factored in?

ANTHEMOS GEORGIADES: Yeah, so some of it's real. I think we've seen various statistics, somewhat overblown. But I believe that like about 20% of rent payments last month were missed. Now, there's always a modicum of rent payments that are missed. So it's not like it went to 0 to 20. But if you combine, like, a record unemployment with the fact that when we survey Zumper's users, and we have 14 million users a month, 1/3 third of Zumper's users either lost their job or were economically impacted by COVID, 1/3. And so this is real.

And so when people miss their rent or they decide not to renew their lease because they just can't afford it and they need to downsize or move in with their parents, this is real. And it goes beyond just COVID. This is not just people who are moving because of shelter in place. These are economic decisions people are making for the long term.

RICK NEWMAN: Hey, Anthemos, Rick Newman. You mentioned some of the places people are moving to, San Diego, for example, Arizona. Are there some cities where there are likely to be rent increases because they're attracting people from places like New York, San Fran, and so on?

ANTHEMOS GEORGIADES: Yes, we see two types of migration. We see migration within geos, and then we see migration between states. So within geos, we see what we call the Brooklyn effect, the way Brooklyn's rents have been outpacing Manhattan's for two years now. People who want to stay in the five boroughs of New York, they're staying, but they're moving out of Manhattan. And so when you look at Brooklyn and Astoria, they're actually up year on year. Brooklyn's up 5%. So this is real within geos.

Same with Oakland and Berkeley in the Bay Area. People are leaving San Francisco, but sometimes they want to stay in the Bay Area. So that's the first class. The second class is between states. The narrative that I think the economists has been pushing for several years, but this is the first year it's actually been true, people just upping and leaving New York, the Bay Area, LA. That's where we're seeing--

If you speak to real estate agents or property managers in Salt Lake City, they're seeing unprecedented demand. And when you ask where it's coming from, their answer is squarely California. It is people who have lived the Californian dream and who are now looking for something different. And they're looking for a higher quality of life.

And so you guys have spoken about this before. You've heard the trend for a long time. Our data never bore it out until this year. And now it is real. I want to be clear. It is not a majority. Everyone is not about to flee New York and the Bay Area. But it is a significant minority. And it's large enough that it's affecting prices downward in those metros and upwards if you look at some of the secondary markets they're moving to.

SEANA SMITH: Hey, Anthemos, how long do you expect this downward impact on prices for places like New York and San Francisco-- how long do you expect that to continue for? And when will we see this rebound? Because as the cities do begin to start to reopen in July-- we're expected to get that for New York City-- you would think that we would see a little bit of a rebound at least in the price of some rentals.

ANTHEMOS GEORGIADES: I think we'll see a deceleration in the downturn. I think Manhattan and San Francisco, as we've used as examples, will continue to decelerate as jobs come back, as graduates move to markets for new jobs. But I think there's a fundamental change in those two markets. Remote work, for the first time ever, is going to be a viable option for people that want to earn a large six figure salary at Facebook. I don't think they need to live in Mountain View anymore. And so I think these changes are actually endemic and are going to last for a while.

I also, to echo some of the comments before I was on, I don't believe the real economy recovery looks anything like the stock market's. The V-shape that the stock market looks like is not what I see in employment in Silicon Valley. It's not what I hear when I speak to other CEOs.

The job losses that many of us incurred are not coming back this month immediately. And so I think as an economy, we will entertain a high level of unemployment for some time. That will have an effect on the real estate market for a while. So I don't think this is something that rebounds by summer. I think we're in this for the medium to long term.

SEANA SMITH: All right, Anthemos Georgiades, the CEO and co-founder of Zumper, great to get your perspective on the show. Thanks so much for taking the time.