Thursday, July 18, 2013

Impact of the Improved Rental Market

Some interesting findings in the just released CoreLogic report regarding rentals across the country. Overall, it COULD be good news for the entire real estate industry. Emphasis on "could". Home owners and realty agents need to make it good news. Here is why.

CoreLogic's "Renter Applicant Risk Index" shows a rise in rental applicant scores in terms of credit and "ability to meet lease obligations" among what it terms "prospective apartment renters" over the past year. In addition, the other significant finding from this report is that applicant incomes were up during the first quarter of 2013 compared with last year. (This report includes single family rentals as well as multi-family housing.)

As positive as this sounds, it seems odd that while the economy struggles and job uncertainty and availability has shown little to no change in most areas that more people are better qualified to rent. We need to explore why that is.

My theory is that too many people are afraid of buying a home in this market and plan to wait it out. Part of this is the fear of losing a job and factors not directly tied in to the real estate market. In addition, the days of merely sitting on a home and having the value increase are long gone. Until or unless they return, a percentage of people will be content to rent.

Many of those who fit into one or both of those categories currently have the funds to make a decent monthly payment, but do not wish to commit long term. Hence, the ability to rent for six months to one year and have the flexibility to buy if conditions improve.

Meanwhile, too many home owners who are not able to get what they need for their homes and thus cannot sell, are not interested in renting their homes as a means to get into another property.

This is why the research report COULD be good news. With so many more and qualified rental candidates out there, why can't more sellers offer a "rent to buy" situation for their home?

It will take the realty agents to come around to this way of thinking, and to this point I'm not seeing it. While it does delay a full commission to the agent, an agent having several "rent to buy" situations is setting up for a nice payday down the road even though much of the "work" will have already been done.

Hopefully instead of waiting for the realty association to publish statistics comparing home sales to past years (which is not a motivation for a potential buyer), they will begin to promote a "rent to buy" scenario as an option to get sellers out of their current property.

The fewer homes for sale there are at a given time, the better the chance that home prices will return to previous levels and again show promise of profit potential over the years.

By not doing so, and with the increase in "quality" rental candidates, chances are many current home owners looking to sell are losing out because qualified "buyers" are renting where they know there are availabilities instead.

That is why these renters statistics COULD be good news. But first, the potential renters need the additional choices that current home owners could give them!

1 comment:

sellmyhouseinaz said...

Outstanding blog! It has been interesting to see how the market has been shifting so drastically in Phoenix. Keep the updates the coming.

AZ real estate