Renter Mobility and Multifamily Mortgage Default Risk |
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| Institution: | 1. Center for the Promotion of Social Data Science Education and Research, Hitotsubashi University, 2-1, Naka, Kunitachi, Tokyo, 186-8601, Japan;2. Reitaku Institute of Real Estate and Urban Studies, Reitaku University, Japan;3. Center for the Promotion of Social Data Science Education and Research, Hitotsubashi University, Japan;1. University of Western Australia, Australia;2. Monash University, Australia;3. University of Queensland, Australia;4. RMIT University, Australia;1. School of Economics and Finance, University of the Witwatersrand, Johannesburg, South Africa;2. Department of Economics, College of Management Sciences, Federal University of Agriculture, Abeokuta, Nigeria |
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| Abstract: | Renter mobility is a major concern for the performance of multifamily mortgages. If enough new renters are not found to replace those that move, vacancy rates can quickly escalate to where cash flows are negative and property mortgages are in jeopardy. In this study we examine how differences in renter mobility patterns by property type can affect mortgage credit risk within submarkets of an MSA. We expand the default model developed by Goldberg and Capone (2000) to use unique distributions of rental unit turnover and vacancy durations for large and small multifamily rental properties. Monte Carlo simulations then show how credit risk on multifamily mortgages is affected if owners of small properties are able to keep tenants longer than owners of larger properties can. The model can be used to explore other potential intra-MSA differences in property market dynamics. |
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