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USA Today: Renters can't escape housing foreclosure crisis

Mike626Mike626
edited April 2008 in Seattle Real Estate
It thought this was a pretty interesting article about how renters are being hit by foreclosures being caused by the bursting bubble:

http://www.usatoday.com/money/economy/h ... tion_N.htm

Some highlights I thought were facinating:
  • From 2004 through 2006, 1.2 million households joined the ranks of renters, more than making up for the loss in renter households sustained from 2002 to 2004.
  • According to the Center for Responsible Lending, each processed foreclosure costs lenders an estimated $50,000, in processing fees, liquidation-sale price cuts and other costs.
  • In the Seattle area, rents rose 2.1% in the Q1 of 2008 over the previous quarter and nearly 9% since the Q1 of 2007. Vacancies in some neighborhoods are at 3%. The average annual rent increase for all units was $84 a month.
  • 18% of foreclosures started in Q3 of 2007 involved non-owner-occupied homes, according to a study by the Mortgage Bankers Association
  • Median rent for the first quarter of 2008:
    • Los Angeles: $1,699
    • Seattle: $1,211
    • All metro areas: $1,368

Comments

  • snigletsniglet
    It makes sense that rents in the Seattle area haven't decline much seeing as how we haven't seen much deterioration of the residential real-estate market yet. Look at places like San Diego or Miami to see what lies in store. Once inventories of unsold homes rises to a critical point, sale prices begin to decline. This in turn will begin the process of increasing foreclosures (i.e. since home-owners without equity won't be able to sell when they run into trouble).

    Once foreclosures rise significantly, then downward pressure begins to be seen on rents, since increasing numbers of home owners (condos, SFHs, etc) begin to rent them out to stop the bleeding since they are unable to sell for the prices they want/need.

    Also, keep in mind that not all the people who lose their homes in foreclosure wind up as renters. Declining real-estate markets tend to lead to higher-density living arrangements, with people moving in with relatives, etc, thus reducing over-all demand.

    The Seattle area has just barely passed the peak of our real-estate appreciation cycle and are about 2 years behind places like San Diego (which also saw their rents begin to appreciate right at the peak of their cycle, as rental inventory was reduced due to condo conversions, etc).
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