Rental Market in SD

[surveyor]

SDR:

I’ve remained silent on this issue for awhile because for one thing I didn’t want to make an uninformed statement. However, it did puzzle me that people were thinking that a huge amount of foreclosures, REO’s, and the bubble bursting would lead to a huge amount of rentals available and that rent would go down.

It would seem more reasonable to me that there would be an increased demand for rentals and that would increase rent prices up. With all these former homeowners now becoming renters, they would put pressure onto the existing rental inventory and they would increase rents.

The best scenario I can think of that would support a decrease of rent is that as the banks finally give up and start dumping their REO’s at a good enough discount, investors and flippers would gradually start bringing these properties into rental shape. Because of the new focus on credit and lending, many investors are being required to put in about 25% down. With this environment, this in my view is a process that would take years longer than the “bottom” of the San Diego real estate cycle.

[bsrsharma]

SD,

I will go with you. That still leaves the question: Who will live in those homes? There will be millions of ex-owners, who are unlikely to become owners. So, if those homes are not going to be owner occupied, to whom will the buyers rent it?
I don’t think there are millions of “Piggingtonians” who will swoop down, buy at a bargain paying 20+% down payment and live there. Just the sheer size of the (home losing) population is going to create its own dynamics. This is like a Southern California forest fire that creates its own weather system. And we have not even considered the political impact of all these. I don’t think the lenders can get away just playing by the rules of the mortgage contract.

[bsrsharma]

SD,

I will go with you. That still leaves the question: Who will live in those homes? There will be millions of ex-owners, who are unlikely to become owners. So, if those homes are not going to be owner occupied, to whom will the buyers rent it?
I don’t think there are millions of “Piggingtonians” who will swoop down, buy at a bargain paying 20+% down payment and live there. Just the sheer size of the (home losing) population is going to create its own dynamics. This is like a Southern California forest fire that creates its own weather system. And we have not even considered the political impact of all these. I don’t think the lenders can get away just playing by the rules of the mortgage contract.

[bsrsharma]

SD,

I will go with you. That still leaves the question: Who will live in those homes? There will be millions of ex-owners, who are unlikely to become owners. So, if those homes are not going to be owner occupied, to whom will the buyers rent it?
I don’t think there are millions of “Piggingtonians” who will swoop down, buy at a bargain paying 20+% down payment and live there. Just the sheer size of the (home losing) population is going to create its own dynamics. This is like a Southern California forest fire that creates its own weather system. And we have not even considered the political impact of all these. I don’t think the lenders can get away just playing by the rules of the mortgage contract.

[donaldduckmoore]

SDR, I have actually read an article about how lenders turned REOs into rental properties until the market recovered in the 90s. I don’t know how it works but that was a common practice back then when the market was bad.

[donaldduckmoore]

SDR, I have actually read an article about how lenders turned REOs into rental properties until the market recovered in the 90s. I don’t know how it works but that was a common practice back then when the market was bad.

[donaldduckmoore]

SDR, I have actually read an article about how lenders turned REOs into rental properties until the market recovered in the 90s. I don’t know how it works but that was a common practice back then when the market was bad.

[JerseyGrl]

I found this on Ben’s Blog, and it addresses my question:

“Some displaced homeowners are getting a cool reception as the surge in real estate foreclosures sends them back to the rental market in search of shelter.”

“Nevel DeHart of a national tenant-screening company, warns that homeowners often are deeply in debt by the time a foreclosure occurs. With no financial reserves to fall back on, they sometimes make poor rental risks, he said. ‘There is just no margin for error.’”

“Ron Bowdoin, who oversees 2,500 rental units in Los Angeles and the Inland Empire, said foreclosure victims often fail to meet his company’s credit standards.”

“‘As they reach the brink of foreclosure, their credit reports have suffered tremendously,’ he said. ‘We have to do a co-signer or large deposits to get them into apartments.’”

[JerseyGrl]

I found this on Ben’s Blog, and it addresses my question:

“Some displaced homeowners are getting a cool reception as the surge in real estate foreclosures sends them back to the rental market in search of shelter.”

“Nevel DeHart of a national tenant-screening company, warns that homeowners often are deeply in debt by the time a foreclosure occurs. With no financial reserves to fall back on, they sometimes make poor rental risks, he said. ‘There is just no margin for error.’”

“Ron Bowdoin, who oversees 2,500 rental units in Los Angeles and the Inland Empire, said foreclosure victims often fail to meet his company’s credit standards.”

“‘As they reach the brink of foreclosure, their credit reports have suffered tremendously,’ he said. ‘We have to do a co-signer or large deposits to get them into apartments.’”

[JerseyGrl]

I found this on Ben’s Blog, and it addresses my question:

“Some displaced homeowners are getting a cool reception as the surge in real estate foreclosures sends them back to the rental market in search of shelter.”

“Nevel DeHart of a national tenant-screening company, warns that homeowners often are deeply in debt by the time a foreclosure occurs. With no financial reserves to fall back on, they sometimes make poor rental risks, he said. ‘There is just no margin for error.’”

“Ron Bowdoin, who oversees 2,500 rental units in Los Angeles and the Inland Empire, said foreclosure victims often fail to meet his company’s credit standards.”

“‘As they reach the brink of foreclosure, their credit reports have suffered tremendously,’ he said. ‘We have to do a co-signer or large deposits to get them into apartments.’”

[SD Realtor]

Surveyor – I agree with you and Stan. That the foreclosure tidal wave will add a substantial supply of tenants that will increase rental demand thereby pushing rental rates up. I do not think that the increased supply of REO properties will get bought up immediately, nor do I think that even if they do get bought up at discounts, that they will pencil out as rentals. Perhaps with enough down… but there are so many better rental markets in places like North Carolina and that area in general most smart money (with respect to rentals) left Cali a long time ago and will not return for a few more years. So I do not foresee a decrease in rents either. My post in essence was an agreement with Stan (about rents increasing)kind of questioning bsrs (well thought out, but definitely debateable) post.

bsr good question… indeed who will live in these homes. Well I am not sure. That would be a good question for those people who purchased REO properties Saturday at the auction. One thing that is crucial for steeper declines is for REO properties to NOT GET PURCHASED. So when they get slurped up that is not good for the bigtime bears. Who is buying them? Don’t know man…

Also your statement, “millions of ex-owners” … well yeah that is true but I don’t focus on nationwide numbers and I caution anyone from doing so.. focus on San Diego, (or at least I do as that is where I live)… so the question really becomes what is happening to the thousands of properties. I think there were what… a few hundred on auction this weekend yeah? Interesting to know how many of them went…As far as the lending climate goes… I get very concerned when I see prognistications about that climate from anyone except Pasadena Broker or HLS. The fact is that many people are having a hard time getting loans but that is because of the secondary market crunch, not because they do not qualify.

Finally what we do NOT WANT is for the housing slump to be politicized. I have posted ad nauseum about this. bsr if Hillary or Obama picks up this football and promises the sheeple that they will own homes with a chicken in every pot I can see big problems for the bears. It is call take yours and my tax money and ship it to Fanny and Freddie so they can buy crap loans so that Mary the 50k a year single mom can buy a new home for 600k that is now under the new conforming loan limit.

DDM you could very well be right that in the past lenders became landlords. I suppose that could happen now, but again I think that this is a very different age and that the secondary market is a much different place then when the S&L’s went belly up. Again, I am far from and expert so if the underlying security does not have any restrictions on the home becoming a rental then so be it. Again, it is all a REALLY clouding situation because the value of all these funds now is so screwed up that really nobody knows what they are worth. The bottom line is that when they have margin calls whether the home is a foreclosure or a rental they have to deal with it… So do all these foreclosures become rentals? Perhaps they do… I don’t see it but stranger things have happened. So far based on the auctions we have seen, the lenders are choosing to sell them off…

SD Realtor

[SD Realtor]

Surveyor – I agree with you and Stan. That the foreclosure tidal wave will add a substantial supply of tenants that will increase rental demand thereby pushing rental rates up. I do not think that the increased supply of REO properties will get bought up immediately, nor do I think that even if they do get bought up at discounts, that they will pencil out as rentals. Perhaps with enough down… but there are so many better rental markets in places like North Carolina and that area in general most smart money (with respect to rentals) left Cali a long time ago and will not return for a few more years. So I do not foresee a decrease in rents either. My post in essence was an agreement with Stan (about rents increasing)kind of questioning bsrs (well thought out, but definitely debateable) post.

bsr good question… indeed who will live in these homes. Well I am not sure. That would be a good question for those people who purchased REO properties Saturday at the auction. One thing that is crucial for steeper declines is for REO properties to NOT GET PURCHASED. So when they get slurped up that is not good for the bigtime bears. Who is buying them? Don’t know man…

Also your statement, “millions of ex-owners” … well yeah that is true but I don’t focus on nationwide numbers and I caution anyone from doing so.. focus on San Diego, (or at least I do as that is where I live)… so the question really becomes what is happening to the thousands of properties. I think there were what… a few hundred on auction this weekend yeah? Interesting to know how many of them went…As far as the lending climate goes… I get very concerned when I see prognistications about that climate from anyone except Pasadena Broker or HLS. The fact is that many people are having a hard time getting loans but that is because of the secondary market crunch, not because they do not qualify.

Finally what we do NOT WANT is for the housing slump to be politicized. I have posted ad nauseum about this. bsr if Hillary or Obama picks up this football and promises the sheeple that they will own homes with a chicken in every pot I can see big problems for the bears. It is call take yours and my tax money and ship it to Fanny and Freddie so they can buy crap loans so that Mary the 50k a year single mom can buy a new home for 600k that is now under the new conforming loan limit.

DDM you could very well be right that in the past lenders became landlords. I suppose that could happen now, but again I think that this is a very different age and that the secondary market is a much different place then when the S&L’s went belly up. Again, I am far from and expert so if the underlying security does not have any restrictions on the home becoming a rental then so be it. Again, it is all a REALLY clouding situation because the value of all these funds now is so screwed up that really nobody knows what they are worth. The bottom line is that when they have margin calls whether the home is a foreclosure or a rental they have to deal with it… So do all these foreclosures become rentals? Perhaps they do… I don’t see it but stranger things have happened. So far based on the auctions we have seen, the lenders are choosing to sell them off…

SD Realtor

[SD Realtor]

Surveyor – I agree with you and Stan. That the foreclosure tidal wave will add a substantial supply of tenants that will increase rental demand thereby pushing rental rates up. I do not think that the increased supply of REO properties will get bought up immediately, nor do I think that even if they do get bought up at discounts, that they will pencil out as rentals. Perhaps with enough down… but there are so many better rental markets in places like North Carolina and that area in general most smart money (with respect to rentals) left Cali a long time ago and will not return for a few more years. So I do not foresee a decrease in rents either. My post in essence was an agreement with Stan (about rents increasing)kind of questioning bsrs (well thought out, but definitely debateable) post.

bsr good question… indeed who will live in these homes. Well I am not sure. That would be a good question for those people who purchased REO properties Saturday at the auction. One thing that is crucial for steeper declines is for REO properties to NOT GET PURCHASED. So when they get slurped up that is not good for the bigtime bears. Who is buying them? Don’t know man…

Also your statement, “millions of ex-owners” … well yeah that is true but I don’t focus on nationwide numbers and I caution anyone from doing so.. focus on San Diego, (or at least I do as that is where I live)… so the question really becomes what is happening to the thousands of properties. I think there were what… a few hundred on auction this weekend yeah? Interesting to know how many of them went…As far as the lending climate goes… I get very concerned when I see prognistications about that climate from anyone except Pasadena Broker or HLS. The fact is that many people are having a hard time getting loans but that is because of the secondary market crunch, not because they do not qualify.

Finally what we do NOT WANT is for the housing slump to be politicized. I have posted ad nauseum about this. bsr if Hillary or Obama picks up this football and promises the sheeple that they will own homes with a chicken in every pot I can see big problems for the bears. It is call take yours and my tax money and ship it to Fanny and Freddie so they can buy crap loans so that Mary the 50k a year single mom can buy a new home for 600k that is now under the new conforming loan limit.

DDM you could very well be right that in the past lenders became landlords. I suppose that could happen now, but again I think that this is a very different age and that the secondary market is a much different place then when the S&L’s went belly up. Again, I am far from and expert so if the underlying security does not have any restrictions on the home becoming a rental then so be it. Again, it is all a REALLY clouding situation because the value of all these funds now is so screwed up that really nobody knows what they are worth. The bottom line is that when they have margin calls whether the home is a foreclosure or a rental they have to deal with it… So do all these foreclosures become rentals? Perhaps they do… I don’t see it but stranger things have happened. So far based on the auctions we have seen, the lenders are choosing to sell them off…

SD Realtor

[TheBreeze]

So during the last real estate crash, lenders became landlords? Were mortgages sold on the secondary market back then? I wonder if some of the mortgage holders today could become landlords if they wanted to. Take a pension fund that holds some MBSs for example, are they allowed to hold rental property? Would they even want to?

I also wouldn’t read too much into HLS’s statements. The tightening of the mortgage market has just begun. Sure some people can still get loans. But, there’s fewer people that can get loans this month than there were last month and there will be even fewer people who can get loans next month. The bubble took time to expand and it will take time to deflate. The stock market bubble of 2000 didn’t fully deflate until 2003, and we all know stocks are much more liquid than homes.

I don’t think we’re going to see a political bailout either. It does not appear that Bush is going to raise Freddie’s and Fannie’s conforming limits. So the Congress can pass all the bills they want, but if Bush won’t sign them, the limits won’t be raised.

[TheBreeze]

So during the last real estate crash, lenders became landlords? Were mortgages sold on the secondary market back then? I wonder if some of the mortgage holders today could become landlords if they wanted to. Take a pension fund that holds some MBSs for example, are they allowed to hold rental property? Would they even want to?

I also wouldn’t read too much into HLS’s statements. The tightening of the mortgage market has just begun. Sure some people can still get loans. But, there’s fewer people that can get loans this month than there were last month and there will be even fewer people who can get loans next month. The bubble took time to expand and it will take time to deflate. The stock market bubble of 2000 didn’t fully deflate until 2003, and we all know stocks are much more liquid than homes.

I don’t think we’re going to see a political bailout either. It does not appear that Bush is going to raise Freddie’s and Fannie’s conforming limits. So the Congress can pass all the bills they want, but if Bush won’t sign them, the limits won’t be raised.

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