By Moe Bedard
When faced with foreclosure, many families have two crises to contend with: losing their home and the effects of tarnished credit. Tarnished credit seriously damages a renter’s prospects in the rental marketplace with some families unable to secure rent due to bad credit or having to pay exorbitant deposits to secure a home or apartment. It appears that we have reached a tipping point however. Now that millions of homeowners are being displaced due to foreclosure the market is flooded with renters that need a place to live. In strict economic terms, these people represent a specific demand in the marketplace and landlords and apartment management companies are finally doing the right thing, both morally and economically, to help these troubled borrowers.
The need for rental units is increasing for families displaced by the housing crisis and so too is the mindset of property managers due to troubled economic times of their own.
From the Wall Street Journal
“In the old days, we wouldn’t even rent to someone who had a foreclosure on their record,” said Jeffrey I. Friedman, president and chief executive of Associated Estates Realty Corp.(AEC). Today, foreclosures are “actually a targeted market.”
The change shows just how tough the economic downturn has been on the apartment sector, which has seen compound annual total returns shaved by more than half for the 12 months ended March 31.
Mounting unemployment has depressed occupancy averages to their lowest in years. With rent increases nearly impossible and landlords throwing in freebies to fill units, the bottom line is feeling stress. Turning “to lower-quality tenants is another indication of distress in the market,” said Macquarie Capital analyst Michael Levy.
It also reflects that the foreclosure pool contains too many potential renters to ignore. New foreclosures started this year are estimated by Barclays Capital at 2.8 million, with 3 million expected in 2010.
With more homes going in to foreclosure I’m certain that rental and leasing standards will relax across the nation. That is, until the invisible hand of the market moves in the direction of the apartment managers. When their rental units are filled and the supply of available rental units diminishes relative to the increasing demand renters could face difficult times ahead again. A word to the wise then…find a rental unit before you go in to foreclosure and plan your exit strategy from your home if you can no longer afford it well in advance!
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I find this whole article so disheartening. Basically, you are saying that people go from living in a beautiful house to basically living on the streets because their credit is destroyed? I am aware of many investors with empty properties who would give anything just to have some sort of income coming out of those properties, so if rentals don’t loosen their restriction, they will be the next ones facing foreclosure, in my opinion.