Investors Bank on Rentals and Abandon Flipping
Investors are renting out about half of the homes they purchase instead of renovating or flipping the properties, according to a new survey.
The latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, which surveyed about 2,500 real estate professionals, found that investors are struggling to resell properties so they are leaning toward renting the homes out instead. The survey estimated that investors will rent out nearly 50 percent of the properties they acquired in July. In July 2010, investors would have rented out only 28 percent of their properties.
The survey also found:
More first-time home buyers are emerging: The survey found that first-time home buyers increased to 36.9 percent in July compared to 35.4 percent the prior month.
Many real estate professionals says that Congress’ debate over the U.S. debt ceiling negatively impacted home buyer activity in July. The debate made many buyers uneasy about purchasing due to economic concerns, survey respondents reported.
Source: “Investors Who Can’t Resell, Rent,” RISMedia (Aug. 23, 2011)
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Landlords Say They’ll Rent to the Foreclosed
Eighty-two percent of independent landlords say they would rent to someone who had lost a home in foreclosure, if the applicant had otherwise good credit, according to a new survey by The National Association of Independent Landlords.
“Landlords typically won’t rent to applicants with poor credit–and a foreclosure will absolutely slam someone’s scores,” says Tracey Benson, president of The National Association of Independent Landlords. “The exception is when they see people who have paid their bills their whole life, but lost their job, can’t meet their mortgage and must hand their keys back to the bank.”
Benson says that applicants with a foreclosure aren’t necessarily bad credit risks. “Often, they lost their jobs and homes through no fault of their own,” she says.
As such, “because of this abundance of defaults, there is a greater need for rental property, so landlords should carefully vet applicants,” Benson says, adding that landlords should do a thorough background check to determine whether defaulting applicants were a victim to financial woes or following a lifelong trend of not paying bills.
Source: “Most Landlords Say They Would Rent to People Who Lost Homes to Foreclosure, The National Association of Independent Landlords Finds,” PRNewswire (April 20, 2011)
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Rentals Get Pricey and Scarce, Study Finds
The number of renters who spend more than half their income on housing is at its highest level in half a century, according to a Harvard University study released Tuesday.
About 26 percent of renters — or 10.1 million people — spent more than half their pre-tax household income on rent and utilities in 2009, according to the study. Most experts recommend renters spend no more than 30 percent of their income on housing.
Additionally, the cost of renting continues to rise as vacancies remain low. The number of renters increased 8 percent nationally between 2007 and 2009, according to Census Bureau figures, and rents climbed 3 percent nationwide.
Many experts blame the shortage of affordable rental housing on rentals failing to keep up with demand. Building mostly came to a standstill in 2009, particularly with a shortage of apartments.
“It’s a real squeeze for the lower-income and moderate-income families, and we’re even starting to see it affecting middle-income families too,” says Erick Belsky, managing director of Harvard’s Joint Center for Housing Studies. “The prospects for improvement anytime soon are dim.”
Rents are expected to continue to climb as developers try to play catch up to meet the demand, analysts say.
Affordable rental housing is most scarce in the western United States. In the West, only 53 units were available for every 100 very-low-income households that are looking to rent, according to a separate study by the Department of Housing and Urban Development. That compared with 65 in the South, 66 in the Northeast, and 87 in the Midwest.
Source: “Study: Affordable Rental Housing Scarce,” The Washington Post (April 26, 2011)
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Scam Uses Foreclosed Homes as Rentals
Four months after signing a lease for a rental property in Palm Bay, Fla., a family of seven has now learned that the lease was fake, the home was in foreclosure, and they had been sending their rent money to a suspected con man, not a landlord, police say.
Dewey Moore Jr., 45, was arrested last week and charged with burglary of an unoccupied dwelling and grand theft. Police are accusing Moore of posting several phony notices for rental properties on Craigslist and then breaking into the homes, changing the locks, and posing as the landlord.
The family of seven discovered they had been duped after the daughter of the property’s actual owners called police to report squatters were living in the foreclosed home.
Police suspect that more homes in the area are involved.
Source: “Police: Family Duped Into Renting Foreclosed Home,” Florida Today (Feb. 8, 2011)
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Rentals Are a Booming Business
Web sites like Airbnb.com, HomeAway.com, and Craigslist are enjoying a surge of listings from home owners, many of whom admit they are hoping to avoid foreclosure by renting out their properties.
Airbnb.com – its full name is AirBed & Breakfast – is the newest of these sites. Since its founding in 2007, it has grown to encompass rentals in 5,700 cities in 148 countries. The company charges 10 percent to travelers and 3 percent to the home owner.
HomeAway.com charges home owners $300 annually to list a property. It is adding 15,000 new properties each month.
Craigslist is free of charge.
Source: Bloomberg, Scott Hamilton and Anthony Feld (07/20/2010)
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Rents Rise as Apartment Vacancies Fall
Apartment vacancies were down and rents were up last month as people got tired of living in their parents’ basements and rented a place of their own.
Nationally, the apartment vacancy rate was 7.8 percent at the end of June, according to research firm Reis Inc., down from 8 percent in the first quarter.
Rents rose 0.7 percent from April to June, the largest quarterly gain in two years.
The advantage hasn’t returned “completely back to owners right now,” says Hessam Nadji, managing director at real estate firm Marcus & Millichap. “But we’re well under way to see that balance shift back.”
Source: The Wall Street Journal, Nick Timiraos (07/08/2010)
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Study: Homeownership Rate Declines
Homeownership rates are down 2 percentage points from their 2006 peak, but could fall another 5 percentage points in the next couple of years, according to a study by the Federal Reserve Bank of New York.
The study subtracts the number of home owners who are underwater from the official homeownership rate calculated quarterly by the U.S. Census Bureau.
Officially, homeownership was 67.2 percent at the end of 2009, but the report says that effectively the rate is about 62 percent if those home owners likely to lose their homes are subtracted from the total.
Cities cited as having very low effective homeownership rates include Las Vegas, Phoenix, San Diego, Los Angeles, San Francisco, Miami, Tampa, Detroit, and Washington, D.C.
Source: The Wall Street Journal, Nick Timiraos (06/07/2010)
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Rental Search Site Logs Heavy Traffic
Online apartment searches increased 11 percent and phone and e-mail queries rose 17 percent in the first quarter, Apartments.com reported.
Apartments.com recorded 5.1 million visits in March 2010, making it the second most visited month in the Web site’s 12-year history. Typically, the peak season for the rental industry extends from April to August, but activity levels from the first three months of 2010 mirror that of the peak rental season, the online housing search engine found.
“This tells us that renters are doing more than just browsing. They are ready to rent and engaging the apartment communities listed on Apartments.com,” said Kevin Doyle, senior vice president and general manager.
Source: Apartments.com (04/05/2010)
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More Sellers are Turning to Rentals
More people are becoming landlords in an economy where selling a home can be challenging.
The nation’s second-largest home insurer, Allstate Corp., says the number of homeowners converting their homeowners insurance to landlord policies rose 27 percent in the first quarter of 2009.
Jim Bass of Jim Bass Real Estate Group in Frederick, Md., says he has begun offering property-management services for absent owners, many of whom are convinced it will be easier to sell in a couple of years.
Holding on probably isn’t the best answer, says economist Edward Leamer, director of the UCLA Anderson Forecast. Leamer suggests negotiating a short sale instead. “Better to take your losses and move on.”
Another factor to consider is whether renting will reduce or eliminate the value of the capital-gains tax exclusion. Federal tax law requires living in the home at least two of the previous five years to qualify for the full capital-gains tax exclusion when the house is sold. Of course, if there is no profit to be had, then this isn’t a problem.
Source: The Wall Street Journal, M.P. McQueen (09/02/2009)
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