Tuesday, November 13, 2007

RealFacts: Foreclosures Not Driving Up Rents

From the Central Valley Business Times:

Apartment rental rates held steady in the third quarter, despite people being forced out of their homes by foreclosures, says RealFacts, a Novato-based database publisher specializing in the multifamily housing market. Even in the Central Valley’s San Joaquin County, which has seen one of the nation’s highest per capita default and foreclosure rates, rents have increased just 2.6 percent year-over-year, with occupancy rates essentially unchanged, says RealFacts.
...
“So our conclusion is that there has been no effect on the rental market,” says Caroline Latham, chief executive officer of RealFacts. “This finding is not so surprising when you stop to think that many of the new condos and houses in subdivisions that were purchased in the past several years were not bought as dwellings but as speculative investments,” she says. “Buyers hope to hold the properties for 18 to 24 months and then sell for 25 percent to 40 percent profit. They never intended to live in the units and didn’t want to become landlords, so the houses were not effectively dwelling units; they were only an investment product.” Some estimates put this motive for investment in the housing market as high as one-third to one-half of all purchases, Ms. Latham says.
From Dow Jones:
Home Depot Inc. (HD) continues to see significant, regional differences in sales, with same-store sales varying widely to make up the overall 6.2% decline, executives said..."In those areas that have been the hardest hit by housing turnover and new home sales, we continue to feel significant pressure," he said. "It is no surprise that Sacramento, Las Vegas and Ft. Myers/Naples (Fla.) fall in this category, with Ft. Myers/Naples posting negative comps in excess of 20%."

10 comments:

Gwynster said...

Nice catch Lander!

Remember all those warnings that rents would rise as the waves of foreclosures took effect? Many of us called it hogwash and it looks like we were right.

Diggin Deeper said...
This comment has been removed by the author.
Diggin Deeper said...

http://biz.yahoo.com/ap/071113/housing_forecast_realtors.html?.v=1

Realtors Forecast Bigger Drop in Sales

Tuesday November 13, 3:02 pm ET
Realtors Say Existing Home Sales to Fall to 5-Year Low in 2007, and Outlook Worsens for 2008.

NAR's basically thrown in the towel on spinning this any different than it is, although they do say the numbers could improve with buyer sentiment improving sometime down the road...


Rents flat?...could it be as simple as over supply meeting normal demand?

"...they were only an investment product.” Some estimates put this motive for investment in the housing market as high as one-third to one-half of all purchases"

That's a big part of the market with no one to fill those homes.

I bought a new condo in Whitefish, MT in 2003, rented it for two years, and sold it in 2005. My wife thought I was crazy to sell it so soon...it must have been divine providence to have gotten out when we did....

Patient Renter said...

"Remember all those warnings that rents would rise as the waves of foreclosures took effect? Many of us called it hogwash and it looks like we were right."

Yep, life is good as a renter :) One thing I've noticed recently is a very subtle change in how people perceive me as a renter. It's not at all to the point where they think I'm a genius for dodging the housing crash, but they at least no longer think I'm an idiot for not buying now else being price out forever!

rocklin renter said...

Many of the folks that go through the foreclosure process will end up in apartments/condos anyway.

This is good news for me, our landy is asking about our intentions as our 2 year anniversary approaches.

My intentions? To stay put, if the price is right!

anon1137 said...

This is going to be bad news for the investors on this blog (which lately seem to outnumber us renters).

smf said...

"...they were only an investment product.”

Nooooo, really?

Have I not said this before?

The whole housing supply issue is completely out of whack.

How many investors bought as investors, instead of calling their (insert # here) homes 'owner occupied'? Hence, no one had any real idea of how much speculating was done.

And this is where you get the 'missing' school children as well, since districts figured that with X # of homes you would get y # of students.

And all that supply is still out there, w/o end users in sight.

SheWrestles said...

Remember all those warnings that rents would rise as the waves of foreclosures took effect? Many of us called it hogwash and it looks like we were right.

There were more 'warnings' that rents would decrease (which they have) as a function of supply, so we're the ones who were actually right.

There are more rentals being advertised now than when I moved here and the listed asking prices are lower.

PeonInChief said...

Vacancy rate has little to do with rent levels, and none before the vacancy rate is above 10%. John Gilderbloom showed this years ago by comparing similar communities and controlling for all factors other than vacancy rate. Rent levels were similar. He did find that the main factors in setting rent levels were (a)the price of the alternative and (b)the amount of control that professional property management firms have over the rental market.

The other factor is, of course, the median income. Rents have been going up in other parts of California because incomes have increased. In the Valley incomes haven't increased (and may actually decline over the next couple of years), so rents are unlikely to increase.

Now it will be interesting to see at what point the vacancy rate might have some effect on rents. If a significant portion of the unwanted property is purchased by investors, vacancy rate might have some effect at that point.

mopar777 said...

Rents are soft right now in the duplex market. I don't dare raise mine. Then I'd be competing with FB's and their empty houses. Across the street from me in Orangevale an idiot realtor has a worn out, outdated 3br, 2ba with no back yard for $1250 and no takers for quite some time.
Some apartment complex managers are raising rents to keep up with inflation only to get alot of 30 day notices for doing so.
We are heading into a recession. People are losing their jobs.