Home Foreclosures to Blame for Rising Cost of Rents and Increase in Foreclosure Rental Scams on Popular Sites Like Craigslist
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According to a recent article on MortgageNewsDaily.com, entitled, Rents on the Rise: Shadow Inventory a Solution? rents are on the rise and will continue so well into next year, possibly substantially. And, it’s due in part it’s due to the home foreclosure crisis.
The Home Foreclosure Crisis and Its Impact on the Rental Market
It’s a classic case of supply and demand: with less inventory (fewer apartments/homes) on the market and more demand for them as more people lose their home to foreclosure and re-enter the rental market, prices shoot up.
The article states:
. . . renters could be facing some substantial rent increases in the year ahead. The firm’s quarterly report shows that the vacancy rates for apartments dropped dramatically during the first quarter and rents have begun to rise . . .
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4 More Reasons Rents are on the Rise Thanks to the Home Foreclosure Crisis
The article also points out other reasons that rents are on the rise, namely:
I. Improving Job Market: Although unemployment still hovers at an uncomfortable 8.8% as of March 2011, the job market is improving, especially for younger workers (those aged 20 to 34), who are usually not looking to buy a home anyway.
Then when you couple this with the fact that . . .
II. The Foreclosure Crisis Continues: Homeowners who are losing their homes to foreclosure are entering the rental market in droves because many can’t qualify for home loans. You have to wait usually at last 3 years after a foreclosure before you can qualify for a Fannie Mae or Freddie Mac home loan.
Adding another wrinkle is that . . .
III. Larger Downpayments are Required to Secure a Home Loan: Where zero-down home loans were common before the foreclosure crisis hit in late 2007, now they’re practically non-existent. As we discussed in a recent post here entitled, Home Loan, Bad Credit and How to Qualify:
Zero down home loans are basically a thing of the past for the foreseeable future (I personally don’t see them ever coming back to the degree they were before this most recent home foreclosure crisis hit).
But the reality is, many who have credit problems (ie, those with credit scores like 580 [and who’ve gone through foreclosure]), don’t have down 5 to 10% down payments. . . . [with] the average home price in America [being] just under $200,000. . . . Even a low down payment of 3.5% is $7,000. And don’t forget, this is just the down payment. This doesn’t take into account closing costs [which can run another 2 to 4 percent of the purchase price]
IV. Fewer Investing in the “American Dream” of Homeownership: More and more Americans are, to put it simply, disgusted by the home foreclosure crisis – whether they’ve lost homes or are on the other side of the fence (ie, they’ve hung onto their homes but are angry at many who’ve “shucked their responsibility” and walked away).
Depressed property values and increased property taxes contribute to this anger, frustration and disgust. So, many are fleeing to rent – unshackling themselves from homes that have become, in essence, bad investments and arguably “mortgage money its.” And not for nothing, many of the rentals are as nice – or nicer – and cheaper than the homes some previous owners have left, but without the maintenance.
Talk about incentive for renting rather than buying.
For all of these reasons, it just makes for many to rent – at least until the market stabilizes and property values start to climb again.
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“Cash for Keys” Can Help if You Have a House in Foreclosure & Can’t Afford to Move
Cash for Keys Program: If You’re in Foreclosure and Have Filed Bankruptcy What You Need to Know
Consumer Alert: Beware of Foreclosure Rental Scams via Popular Sites Like Craigslist.com and Kijiji.com: Insight on How to Avoid Them