Zumper COO on the state of the apartment rental market amid COVID-19

Zumper COO Vishal Makhijani joined Yahoo Finance's Jen Rogers, Myles Udland, and Dan Roberts to discuss the state of the apartment rental market during the coronavirus outbreak.

Video Transcript

- Right now, I want to talk about the real estate market and the rental marketplace in particular. Zumper is the largest privately held rental marketplace. 13 million people use Zumper each month. I want to bring in Vish Makhijani. He's Zumper's CEO and president. So Vish, I know one person who's a renter that moved in the last few weeks, and I can barely believe that she did it and was able to pull it off. How much of a drop-off have you seen in people on your site searching for new apartments in the last two weeks?

VISHAL MAKHIJANI: Hi, Jen. So first of all, we've seen major hits to volume of people renting, as you might imagine, for markets that have shelter in place as the rule. I wouldn't say it has stopped completely, but it's down significantly. There's always been a measure of the market-- you know, millennials, which is a big part of our user base, who seek to do things digitally. So they have rented things sight unseen. But volumes are down a ton.

- Now, Vish, you guys closed the funding round, like, 2 and 1/2 weeks ago, so kind of a weird spot for you, certainly as a company. I would imagine you're quite bullish for your prospects, your value proposition, where you sit in the marketplace. You heard our previous conversation when we were discussing how recessions kind of change everything inside an operating environment.

Just internally right now, is how you guys are looking at the future-- how are you trying to evaluate how that might change? I mean, things have moved so quickly in the last couple of weeks. Where do you see the next 6 to 12 months going broadly? Because certainly, the economic cycle is a big part of how much people want to be moving with respect to their housing situation.

VISHAL MAKHIJANI: No question. Before the pandemic and the virus, there were tailwinds going on in this country to begin with, which is rental was becoming more and more a part of the landscape. Both because of student debt and deferral of marriage, rental as a category versus homeownership had been on the rise. I think unfortunately, this recession is going to drive that further.

All that being said, as Jen was asking, volumes in the near term are down. We are fortunate that we were able to raise capital just in the last few weeks, so just prior to all of this happening. If you look at other markets-- and once again, it won't be exactly the same. When SARS was a problem in China, you saw rental real estate markets rebound rather quickly after the danger period was over. Once again, we don't know how this one is going to react, but we're looking for indicators like that to see what the next 6 to 12 months brings.

- Vishal, Dan Roberts here. Thanks for coming on. I saw a take on Twitter in the last few days that-- I forget who it was. Someone influential was saying, people are not going to rent or buy a house without going and seeing it in person, from a virtual tour. They're just not. Now, of course, you would probably beg to differ, and your business would beg to differ already. But maybe whether or not people would in the past, this time, a lot of people think, is going to change a number of industries forever.

I mean, we don't know how long it will last. Even once we're allowed to go back to our offices and the coast is clear, so to speak, certain things are going to really change. A lot of people think that maybe some people will never want to go to an event again where they're really densely packed with people, really close to them. So in that spirit, maybe this area [INAUDIBLE], maybe you think people will become more used to making a choice to rent or buy a place just from a virtual tour.

VISHAL MAKHIJANI: As tough as this situation is-- and our thoughts and hearts go out to folks affected by the virus as well as health care professionals responding-- we've always seen the future of making apartments as easy as booking a hotel. And that means using digital tools to make that happen.

In some ways, this is going to make the future happen faster. Our raising that capital is allowing us to lean into, frankly, convincing landlords-- less so renters, but convincing landlords, hey, they should use digital lock boxes. Hey, they should really have great 3D video. Over the last weeks, we have already been enabling much of this capability in our platform. And in some ways, we see this accelerating to that future state.

You know, there always will be likely a small portion-- a portion of the market that insists on seeing something physically. And even there, we're able to allow experiences that perhaps make people feel more comfortable-- i.e. being able to tour an apartment on their own with nobody else or being able to have a professional provide a walking digital tour through a property. So there's alternatives, and we think this situation allows us to, frankly, accelerate the introduction of those capabilities.

- Given maybe some landlords are making those changes and accelerating the digital step there, what other kinds of changes are you seeing on really the supply side? We've addressed a little bit of what's happening with demand. But in terms of inventory or pricing-- I mean, think about-- if I had an apartment to rent right now, I would think I'd be renting it for less than maybe a month ago. Do you have that kind of visibility?

VISHAL MAKHIJANI: Sure. We sure do. And I think what's happening right now might not be what happens in a little while, too. So in the recent, immediate period, we've seen a pop in short-term rentals as vacation real estate has had to try and pivot and to try to find some cash flow. Those units or properties are making their way onto our platform.

So we've seen, I think, almost a 25% increase in short-term properties popping up on our platform. We've seen longer-term properties, though, actually tick down a little bit in that I think landlords are uncertain about the prices that they can command, and they're trying to figure that out. And so we've seen this little oscillation, I'll call it, where short-term properties are coming on rather quickly, because those property owners might have been thinking about how they manage their property on places like Airbnb and so forth. And so we've been working with folks like Airbnb, Sonder, and some other folks who have more short-term inventory, and that's making its way into our platform right now.

- Vish Makhijani, Zumper COO and president. As we say, really, every industry impacted here. And we can see from talking to you what kind of changes you're addressing right now as well. Thanks so much for your time.