Post by jeffolie on Feb 27, 2013 7:39:00 GMT -6
[glow=red,2,300][/glow]Southern California rents on the rise as mortgage qualifying gets tougher
02/26/2013
You don't have to tell Jeff Johnson why rents continue to climb in the Southland. His family of four is living the reason.
They lost their home in Long Beach's upscale Naples area to foreclosure nearly five years ago when Johnson's wife, Shelly, lost her job. Since then, the Johnsons have been renting a house in neighboring Belmont Shore.
"We weren't left with many options," Jeff Johnson said. "We tried to refinance, make payments and work with our lender, but we lost the house. We found ourselves renting again, and our credit scores were hit hard, and almost five years later, here we are — still renting."
Like many others, the Johnsons were double victims of the housing market collapse. Not only did they lose their home, but they also found themselves at the mercy of a rental market where rates were climbing because demand was so high.
Today, qualifying for a mortgage has become difficult for many aspiring young buyers, keeping them in rental properties longer, real estate experts say. It's even more difficult for those with incomes or credit scores bruised by unemployment and foreclosure.
Rents on the rise
In Southern California rents have continued to rise, especially in Los Angeles County, where rent for multifamily housing had been forecast to increase 7.9 percent to $1,722 last December, with a total two-year growth expected to hit 9.6 percent by the end of 2013, according to a study by USC's Lusk Center for Real Estate. In 2011, the average rent was $1,596.
USC is releasing its 2013 report with the actual 2012 numbers in April.
The expected increases are part of a continuing trend, data show.
In 2011 rental prices rose in 39 of 40 submarkets in Los Angeles, Orange, San Diego, Riverside and San Bernardino counties, according to the same study. That's in stark contrast to 2009, when rents rose in only three markets, and 2010, when 26 markets saw increasing rents.
In the Inland Empire, multifamily housing rent was expected to grow 3 percent year-over-year to $1,101 last December, with total growth expected to hit 3.8 percent by the end of 2013. In December 2011, the average rent was $1,069 a month.
In Orange County, rent was forecast to increase 3.3 percent to $1,573 in December, with an expected total growth of 5.1 percent by the end of 2013. In 2011, the average rent was $1,523.
In San Diego County, rent was projected to grow 3.4 percent to $1,424 in December, with an expected total growth of 5.2 percent by the end of 2013. In 2011, rent was $1,377 a month.
Landlords no longer have to "pony up in order to entice tenants," said Victor Calanog, chief economist with Reis Inc., a New York based real-estate data firm.
He added that rising vacancies suggest rents are "approaching equilibrium" but aren't likely to fall soon.
One of the biggest reasons for the rise in multifamily housing rent, Calanog said, is the "utter lack of supply."
During the housing boom, developers primarily focused on building single-family homes and condominiums. While some of those properties have returned to the market as rental housing, demand to buy new homes remains strong.
"The implicit demand for rental units will remain high as long as the for-sale housing market remains on the ropes," Calanog says in a real estate report.
The rising cost of renting is putting pressure on tenants at a time when many are still grappling with falling incomes or slow income growth.
In the third quarter of 2012, renters spent 24.1 percent of their disposable income on financial obligations, according to the Federal Reserve. Things such as rent, debts and auto leases. That was the highest level since early 2010.
This contrasts with living costs for homeowners, specifically mortgage rates, which have fallen steadily in recent years amid record low interest rates.
During the third quarter, homeowners, including those who don't have mortgages, spent 13.9 percent of their disposable income on financial obligations, the lowest share since 1984, according to the Federal Reserve.
Housing is just one of many costs in a consumer's annual budget. Gasoline prices have fallen from their record high, inflation has remained in check, and low interest rates mean lower monthly payments on auto loans and other debts.
But foreclosure rates and stricter mortgage-lending standards have helped make rental housing the best-performing segment of commercial real estate for the past two years, Calanog said.
The vacancy rate, or apartments available for rent, fell nationally for seven straight quarters from a three-decade high of 8 percent at the end of 2009, according to Reis.
This demand, said Johnson, the Long Beach resident, has given "landlords the upper hand."
A 36-year-old iron worker, Johnson said he is paying more than a third of his $60,000 gross annual income on a $2,000-a-month house he and his family are renting.
"Our credit score has taken a dive and I'm not sure if we will ever be able to buy again," he said. "And with so many people in the same boat, landlords have taken advantage. Rent has gone up and it is a real struggle."
Relief in sight
But there may be some relief in the form of construction.
According to the U.S. Census Bureau, builders are making up for lost time, and multifamily construction is rebounding from a 50-year low reached in 2009.
Construction spending, according to the Census Bureau, climbed to $23.8 billion in 2011 from $15.6 billion a year earlier. During this same time period, apartment vacancies rose slightly, from 4.6 to 4.7 percent, the first increase since 2009, according to Reis's analysis.
Calanog said construction of new complexes may cause rent hikes to stall.
"The sector is benefiting from some of the lowest figures for new construction on record," he said. "By 2013, the influx of new units may begin eroding any benefit the sector derives from tight supply conditions."
In the long run, rising rents will encourage more families to buy, Calanog said.
This was the case for Sarah Beth Smith and her husband, Donny, who, after buying a home, lowered their monthly housing cost to $700 for the mortgage and taxes from the $1,250 they were paying to rent.
Smith, a stay-at-home mom, said the couple have used the majority of their savings to catch up on bills that were neglected while renting. She said the savings also allows for more family outings with their three children.
"We ran the numbers over and over again, and we just couldn't figure out why we were renting," she said. "We were giving money to someone else when we could save money and own our own home."
www.presstelegram.com/news/ci_22673686/southern-california-rents-rise-mortgage-qualifying-gets-tougher
02/26/2013
You don't have to tell Jeff Johnson why rents continue to climb in the Southland. His family of four is living the reason.
They lost their home in Long Beach's upscale Naples area to foreclosure nearly five years ago when Johnson's wife, Shelly, lost her job. Since then, the Johnsons have been renting a house in neighboring Belmont Shore.
"We weren't left with many options," Jeff Johnson said. "We tried to refinance, make payments and work with our lender, but we lost the house. We found ourselves renting again, and our credit scores were hit hard, and almost five years later, here we are — still renting."
Like many others, the Johnsons were double victims of the housing market collapse. Not only did they lose their home, but they also found themselves at the mercy of a rental market where rates were climbing because demand was so high.
Today, qualifying for a mortgage has become difficult for many aspiring young buyers, keeping them in rental properties longer, real estate experts say. It's even more difficult for those with incomes or credit scores bruised by unemployment and foreclosure.
Rents on the rise
In Southern California rents have continued to rise, especially in Los Angeles County, where rent for multifamily housing had been forecast to increase 7.9 percent to $1,722 last December, with a total two-year growth expected to hit 9.6 percent by the end of 2013, according to a study by USC's Lusk Center for Real Estate. In 2011, the average rent was $1,596.
USC is releasing its 2013 report with the actual 2012 numbers in April.
The expected increases are part of a continuing trend, data show.
In 2011 rental prices rose in 39 of 40 submarkets in Los Angeles, Orange, San Diego, Riverside and San Bernardino counties, according to the same study. That's in stark contrast to 2009, when rents rose in only three markets, and 2010, when 26 markets saw increasing rents.
In the Inland Empire, multifamily housing rent was expected to grow 3 percent year-over-year to $1,101 last December, with total growth expected to hit 3.8 percent by the end of 2013. In December 2011, the average rent was $1,069 a month.
In Orange County, rent was forecast to increase 3.3 percent to $1,573 in December, with an expected total growth of 5.1 percent by the end of 2013. In 2011, the average rent was $1,523.
In San Diego County, rent was projected to grow 3.4 percent to $1,424 in December, with an expected total growth of 5.2 percent by the end of 2013. In 2011, rent was $1,377 a month.
Landlords no longer have to "pony up in order to entice tenants," said Victor Calanog, chief economist with Reis Inc., a New York based real-estate data firm.
He added that rising vacancies suggest rents are "approaching equilibrium" but aren't likely to fall soon.
One of the biggest reasons for the rise in multifamily housing rent, Calanog said, is the "utter lack of supply."
During the housing boom, developers primarily focused on building single-family homes and condominiums. While some of those properties have returned to the market as rental housing, demand to buy new homes remains strong.
"The implicit demand for rental units will remain high as long as the for-sale housing market remains on the ropes," Calanog says in a real estate report.
The rising cost of renting is putting pressure on tenants at a time when many are still grappling with falling incomes or slow income growth.
In the third quarter of 2012, renters spent 24.1 percent of their disposable income on financial obligations, according to the Federal Reserve. Things such as rent, debts and auto leases. That was the highest level since early 2010.
This contrasts with living costs for homeowners, specifically mortgage rates, which have fallen steadily in recent years amid record low interest rates.
During the third quarter, homeowners, including those who don't have mortgages, spent 13.9 percent of their disposable income on financial obligations, the lowest share since 1984, according to the Federal Reserve.
Housing is just one of many costs in a consumer's annual budget. Gasoline prices have fallen from their record high, inflation has remained in check, and low interest rates mean lower monthly payments on auto loans and other debts.
But foreclosure rates and stricter mortgage-lending standards have helped make rental housing the best-performing segment of commercial real estate for the past two years, Calanog said.
The vacancy rate, or apartments available for rent, fell nationally for seven straight quarters from a three-decade high of 8 percent at the end of 2009, according to Reis.
This demand, said Johnson, the Long Beach resident, has given "landlords the upper hand."
A 36-year-old iron worker, Johnson said he is paying more than a third of his $60,000 gross annual income on a $2,000-a-month house he and his family are renting.
"Our credit score has taken a dive and I'm not sure if we will ever be able to buy again," he said. "And with so many people in the same boat, landlords have taken advantage. Rent has gone up and it is a real struggle."
Relief in sight
But there may be some relief in the form of construction.
According to the U.S. Census Bureau, builders are making up for lost time, and multifamily construction is rebounding from a 50-year low reached in 2009.
Construction spending, according to the Census Bureau, climbed to $23.8 billion in 2011 from $15.6 billion a year earlier. During this same time period, apartment vacancies rose slightly, from 4.6 to 4.7 percent, the first increase since 2009, according to Reis's analysis.
Calanog said construction of new complexes may cause rent hikes to stall.
"The sector is benefiting from some of the lowest figures for new construction on record," he said. "By 2013, the influx of new units may begin eroding any benefit the sector derives from tight supply conditions."
In the long run, rising rents will encourage more families to buy, Calanog said.
This was the case for Sarah Beth Smith and her husband, Donny, who, after buying a home, lowered their monthly housing cost to $700 for the mortgage and taxes from the $1,250 they were paying to rent.
Smith, a stay-at-home mom, said the couple have used the majority of their savings to catch up on bills that were neglected while renting. She said the savings also allows for more family outings with their three children.
"We ran the numbers over and over again, and we just couldn't figure out why we were renting," she said. "We were giving money to someone else when we could save money and own our own home."
www.presstelegram.com/news/ci_22673686/southern-california-rents-rise-mortgage-qualifying-gets-tougher