While inventories of homes for sale have been shrinking this spring, MLSs are filling the void with rental listings for single family homes that until recently were foreclosures. Some 16.1 percent of all listings on MLSs today are rentals, more than double the number in 2006.
Single family rentals are $3 trillion business today and growing as investors turn to real estate and opt to rent out the bargains they buy until prices improve. Today the single family rental market accounts for 21 million rental units or 52 percent of the entire residential rental market, according to a new study by CoreLogic economist Sam Khater.
Yet the single family rental market is poorly understood and almost invisible to economists and journalists because virtually all rental market data tracks multifamily properties and either ignores the single family segment or lumps it together with multifamily.
“Single family rentals are very distinct from multifamily and they behave very differently,” said Khater in an interview with Real Estate Economy Watch. For example, on a per unit basis, rents for single family rentals run 1.5 to 1.6 times higher than multifamily. Unlike multifamily, millions of single family rentals are listed on MLSs by real estate brokers, many of who represent new owners in acquiring investment properties. As the for-sale inventory has trended down since 2005, the rental share rose 13.3 percent last year alone. As of the end of last year rental closings were up 11.5 percent year-over-year while prices fell 9.8 percent during the year. Demand is strong. The national average months’ supply for single family rentals was 4.5 months in December compared to 6.2 months for homes listed for sale.”
Another important difference is the nature of the tenants. Single family rentals, usually stand-alone properties in ownership settings, appeal more to families. In fact, the typical SFR tenant is a family that has just left a foreclosure and can afford to pay the rent on a former foreclosure but could not make the mortgage payment on their old home, perhaps because they bought with alternative financing or purchased at the peak and could not get a modification when their home lost value. Over the past five years, foreclosures have turned more than 3 million homeowners into renters. Typical multifamily tenants, however, are younger, generally single and more mobile, and have never owned a home.
Khater found a strong relationship between distress sales markets and single family rentals. Census data shows a correlation between single family rentals and the hardest hit areas of the so-called “sand states”-Arizona, California, Florida and Nevada. Investors buying REOs and short sales in foreclosure markets convert them to rental units and homeowners in the same locale who have lost their homes to foreclosure rent homes that until recently were owned by other families who suffered the same ill fortune.
Written by: Steve Cook Mon, April 23, 2012
BY NICK TIMIRAOS, ROBBIE WHELAN AND MATT PHILLIPS
Some of the biggest names on Wall Street are lining up to become landlords to cash-strapped Americans by bidding on pools of foreclosed properties being sold by Fannie Mae.
The idea is that the new owners would rent out the homes at first rather than reselling—potentially aiding a housing-market recovery by reducing the number of properties clogging the market. The fact that big-name investors are interested also suggests they anticipate sizable future profits in housing.
Bulk sales, however, pose a trade-off. While the current approach of selling homes one-by-one has its own high costs and is sometimes inefficient, selling properties …
Nothing sells your rental property like a great photograph, so this is no area for shortcuts. Whether you hire a professional or decide to try these tips for yourself, make sure you get the shots that show off your rental property in its best light!
Hit the highlights
Just like anything you’re marketing, put your rental’s best face forward. Renters want to know how livable a home can be, so they will be especially interested in the areas they’ll spend the most time in that have gotten the highest traffic from previous tenants: the kitchen, living room, bathroom and bedrooms, especially.
Once you’ve covered the main areas, don’t forget to get a few close-ups of the amenities—new appliances, designer cabinets, or the brand-new sink in the bathroom. Whatever details give your rental character and appeal deserve a good photograph.
Go for high resolution
Even a pretty good digital camera (not your phone!) can produce great shots, if you take your time with the settings. On your camera’s menu, be sure to set it for the highest resolution you can achieve. Color saturation is the key, so be hesitant to use the flash if you don’t need it. Experiment with and without it to see which setting gives you the best depth of focus and room detail. You want the viewer to feel as if they are in the rooms themselves when they see your property photos.
Take multiple angles
As in life, every room has a different sense of place, depending on how you look at it. Try your rooms from each entrance and from different sides to see which shots give the best look and feel. Angles may be affected by natural light, so you might want to try different times of day, as well.
Be sure to go outside, too, to shoot the view from the main windows and get a whole-house exterior shot, as well as photos of the yard or deck.
If you have access to a 360-degree camera and know how to use it, the results can give potential residents the feel of actually being inside your property.
Don’t forget the power of a visual aid when it comes to marketing your rentals. Photographs are key, so take the proper steps to make sure yours make your property truly shine!
The housing market remains a potent drag on the economy as home prices continue to slip, foreclosed homes fill some neighborhoods, and millions of construction workers scramble for jobs.
But one group is sitting pretty: landlords.
Unlike home prices, rents have been rising, up 2.4 percent in January from a year earlier, according to recent data, not adjusted for inflation, released by the Labor Department.
With few rental buildings erected over the past few years, available units are going fast. Nationwide, the apartment vacancy rate is down to 5.2 percent, its lowest level in more than a decade, according to the research firm Reis Inc.
Rent increases are greatest in places like San Francisco; Austin, Texas; and Boston, where technology companies in particular are hiring, as well as in New York City and Washington, D.C. But cities like Chicago and Seattle, where house prices are still declining quite sharply, have had rental increases, too.
“We are more of a renter nation than we have been for a while,” said Christopher J. Mayer, a professor of real estate at the Columbia University Business School.
Economists suggest favorable conditions for landlords will continue for at least a year, with employment gradually rising and apartment construction remaining constrained.
As job growth has begun to accelerate in recent months, young people are starting to move out of their parents’ homes or away from shared rooms and into their own rentals. Families who might previously have bought homes are also staying in rentals longer. They may be waiting for the housing market to hit bottom or finding it difficult to qualify for a mortgage.
Many others remain uncertain about their job prospects and wary of the obligations of ownership after the housing bust.
When Charles Griffith moved with his wife and two children to Orlando, Fla., last fall, they chose a new two-bedroom apartment for $1,140 a month. They left a four-bedroom, 2-1/2-bath house they had bought a decade ago in Antioch, Calif. His brother-in-law has moved in and taken over the mortgage payments.
Griffith, who works as a supervisor for Southwest Airlines, and his wife, a customer service representative for the airline, are enjoying the flexibility and convenience of renting, as well as amenities like a pool.
“We kind of like the situation now of not having to be under so much pressure,” said Griffith, 40, adding that the family may eventually buy in Orlando. But “with the economy and the airline industry, that factors into us thinking maybe we should hold off for a while.”
The home ownership rate has been falling from its peak of 69.4 percent in 2004, according to census data. By the fourth quarter of 2011, it was down to 66 percent. That means about 2 million more households are renting, said Kenneth Rosen, an economist and professor of real estate at the Haas School of Business at the University of California, Berkeley.
Not all those people are choosing apartments, of course. Some are moving into single-family homes left vacant by foreclosures. Eager to capitalize on the trend, investors are scooping up some houses at a deep discount and leasing them to tenants who have lost their own homes.
Several prominent hedge funds and private equity firms have recently announced plans to invest in distressed properties and convert them to rentals. And earlier this month, the government solicited applications from investors interested in buying pools of foreclosed properties held by Fannie Mae and Freddie Mac, as well as the Federal Housing Administration.
Investors could help the market by turning empty houses into rentals, said Diane Swonk, an economist at Mesirow Financial in Chicago.
“It can make the difference between a neighborhood being literally like Detroit — dead forever — or a neighborhood that has another chance at life,” she said.
Still, it is apartments, not houses, that are in the most rental demand.
Although many families crushed by the recession have doubled up and plenty of underemployed 20-somethings are living with their parents, some young people are finally getting their own space. Nearly 60 percent of job gains in the past two years have gone to people who are 20-34, a crucial rental group, according to an analysis of Labor Department data by G. Ronald Witten, a consultant to apartment companies.
During the economic downturn, apartment developers retrenched. The number of new apartments completed fell from 284,200 in 2006 to less than half that number in 2011, according to census data.
The limited supply is pushing up prices in some markets. In San Francisco, rents jumped close to 5 percent last year, according to Reis, and increases averaged 3 percent in Austin and New York. Landlords have also been withdrawing incentives like a free month’s rent.
Liz Brent and Matt Mochizuki moved into a studio apartment a year ago in the Mission District in San Francisco for $1,395 a month. Now they want more space.
Brent, 26, makes costumes and is working as a barista at a cafe where customers leave big tips. Mochizuki, 27, has a steady job with a metal fabricating studio. They are budgeting $1,800 a month in rent.
But at an open house for an apartment billed as a one bedroom, they found a studio with an awkward layout and bad light. More than 40 people were in line, many ready to hand over a check.
“That’s what the market is like now,” Brent said of her fruitless search. “That’s how many people showed up for this tiny apartment with no windows.”
A few metropolitan areas are experiencing a much softer rental market. In Atlanta, owners of vacant condos are lowering rents to attract tenants, and in Las Vegas, homes are taking six weeks to lease and rents are still well below their peaks, said C. Terry Robertson, broker of Desert Realty.
Orlando might seem an unlikely place for rental strength. The unemployment rate, at 9.7 percent, is higher than the national average, and home prices slipped 4.6 percent last year, according to the Standard & Poor’s Case-Shiller home price index.
Yet Ric Campo, chief executive of Camden Properties, a real estate investment trust that owns apartment buildings, said rental business was brisk at its LaVina development. Since the office for the 420-unit complex opened last summer, more than half the apartments have rented.
That’s “a faster rate than we’ve ever seen in Orlando,” Campo said. The company has raised the base rent on a two-bedroom apartment to $1,080, from $995 a month.
Many are left to wonder whether the housing collapse has had a more profound effect.
“I think it’s going to be interesting to see whether there’s been a fundamental sociological shift in that 20-35 year old cohort, where they literally say ‘this American dream just doesn’t work for me,”’ said Brad Forrester, chief executive of the ConAm Group, which manages about 50,000 apartments in the western United States.
Matt Byford, a 24-year-old litigation consultant in Chicago, is certainly in no hurry to buy. He has been renting in the Lincoln Park neighborhood since his college days.
Given the low purchase prices and record low interest rates, Byford acknowledges that the financial scale probably tips more toward buying than renting. “Since I can pretty much assume with confidence that it’s not going to go anywhere,” he said, “I don’t necessarily have a sense of urgency.”