New Breed of Lenders Helping Pay the Rent

Several startup companies are offering loan products meant to help people pay their rent. From an article in the Wall Street Journal:

These companies, which also include Domuso and Till, are entering a market long associated with payday lenders. Compared with cash-advance loans, which come with annual interest rates as high as 700% in some states, funds from the rent-lending startups are available at much lower cost. Some are competitive with credit-card borrowing rates at less than 20%...

Other companies offering rental loans see their products as a backup for tenants in more precarious circumstances. Till, which advertises its loans as much cheaper than those of payday shops, pitches rental financing to renters and landlords as a way to avoid evictions.

Data on how often renters default on their loans is hard to come by from third parties, and most of the rental-lending companies won’t share such information. Some lenders say one measure could be the “serious” delinquency rate on unsecured personal loans, which is defined as borrowers who are more than 60 days behind on payments. It stood at 3.6% in the fourth quarter of 2018, according to the credit agency TransUnion .

Where Rents Are Most Affordable in the Piedmont Triad

According to a report released by Zumper, rents in Winston-Salem and Greensboro have remained flat over the last year and remain among the most affordable in the country. From the Triad Business Journal:

According to the index, the price of a one-bedroom apartment in Greensboro averages $630 per month while a two-bedroom goes for $750. In Winston-Salem, a one-bedroom averages $680 per month and the cost of a two-bedroom is $750.

In comparison to other cities included in the survey, both Greensboro and Winston-Salem are bargains for apartment dwellers. Greensboro ranks as the 15th-cheapest city for rentals while Winston-Salem places 25th.

Crystal Chen, a Zumper researcher, said one thing that’s keeping rental prices low in the Triad and elsewhere is the fact that rates on home mortgages remain reasonable, making home ownership a viable alternative to renting for many. Chen said there were also a large number of apartments built in Greensboro and Winston-Salem over the past year, making the market more competitive and meaning landlords must keep rents reasonable in order to secure good tenants.

Here’s a link to the Zumper index page, and below are the charts showing Winston-Salem and Greensboro’s rankings.

Image from Zumper.com

Image from Zumper.com

Survey Shows Triad Rents Up, Still Lag Other NC Metro Areas

ApartmentList released results of a survey they conducted recently and it shows that rents for Triad apartment are up year-over-year, but the Triad still trails other NC metro areas in rent rates. The Greensboro News & Record picked up the story:

 

Despite the growth in prices compared with last year, however, Greensboro offers some of the most affordable apartments in the state.

The median rent for a two-bedroom apartment in Greensboro is $800, making it seventh in the state compared with Asheville’s median rent of $1,210.

Median rent for a one-bedroom apartment in Greensboro is $690, according to the survey.

In High Point, median rent for a two-bedroom apartment is $820 and $680 for a one-bedroom.

And in Winston-Salem, the median for a two-bedroom apartment is $750. No information was reported for a one-bedroom apartment.

Homeownership Rate Lowest Since 1967, US Rental Vacancy Rate at 6.8%

In 2Q15 the US homeownership rate fell to 63.4%, down from 63.7% in the first quarter of the year, the lowest it’s been since 1967.  The result has been an increase of about 2 million renter-occupied units in the last year, resulting in a vacancy rate of just 6.8% which is down from 7.1% in the first quarter. From BloombergBusiness:

Would-be homebuyers have been held back by stringent mortgage standards and wage growth that hasn’t kept up with surging home prices. The average household income in June was 4 percent below a record high set in early 2008, even as unemployment dropped to its pre-recession rate, according to Sentier Research LLC.

 “We’re still suffering the effects of the housing collapse and the financial crisis,” said Mark Vitner, senior economist with Wells Fargo Securities in Charlotte, North Carolina. “We may have another percentage point to go before we see a bottom” in the homeownership rate, he said.

Home values have jumped 34 percent since reaching a bottom in early 2012, making purchases more expensive for entry-level buyers. Prices in 20 U.S. cities climbed 4.9 percent in May from a year earlier, the S&P/Case-Shiller Index showed Tuesday.

Realtors ID 7 Million People Who Won’t Likely Buy a Home Again

The National Association of Realtors has released a report that basically says that 7 million of the 9.3 million people who were foreclosed on during the recession will not likely buy a home in the future:

According to a new study by the National Association of Realtors (NAR), nearly 1 million of the people whose homes were foreclosed upon during the financial crisis have already repurchased homes. Another 1.5 million are likely to buy again within the next five years.

But that leaves out of the market nearly 7 million of the 9.3 million who lost their homes to foreclosure between 2006 and 2014.

“They won’t be a significant factor to the housing market going forward,” NAR Chief Economist Lawrence Yun told Bloomberg Business. “The majority of the 9.3 million won’t be coming back.”…

But one thing that will dampen the demand for many of the homeowners that went underwater is that mortgage underwriting standards have become much stricter, so people who, for example, used a subprime mortgage to purchase a home will be unlikely to re-enter the market.

“Many of them should not have gotten a mortgage to begin with,” NAR’s Yun said in his interview with Bloomberg Business.

America’s Two-Tier Economy Good for Apartment Industry

The Wall Street Journal has an extensive article about America’s bifurcated economy that helps explain why the apartment sector is doing so well:

For the first time, U.S. builders last year sold slightly more homes priced above $400,000 than those below $200,000. As a result, the median price of new homes exceeded $280,000, a record in nominal terms and 2% shy of the 2006 inflation-adjusted peak.

Total sales last year, however, were up just 1% compared with 2013, and more than 50% below their average from 2000 to 2002, before the housing bubble…

Young households have been slow to buy homes because of the tough job market. Many would-be buyers can’t save enough for a down payment or don’t earn enough to qualify for a mortgage. Student debt holds others back.

A typical household, for example, would need around $60,000 in cash to make a 20% down payment on the median-priced new home in the U.S. To qualify for a mortgage, they would need good credit and to show an annual income of about $45,000, assuming little other household debt. A government-insured loan in this example could call for an $11,000 down payment but would require an annual income of $60,000…

With fewer potential customers, builders have largely abandoned the entry-level market. “If a builder can make money on something, he’ll build it. The problem is that they can’t make money at the entry level,” said John Burns, of Irvine, Calif., a consultant to builders.

But rentals, the low-end of the housing market, are booming. Apartment construction has neared its fastest pace since 1989. Two of the nation’s largest home builders, Toll Brothers Inc. and LennarCorp. , have both launched multifamily construction divisions, each with around 5,000 units in the pipeline.

This apartment sector’s performance is no secret, but as the Journal’s article points out this split in the US economy is not confined to housing. In sector after sector – cars, food, travel, etc. – sales of luxury and discount brands are booming while the sales of mid-tier brands suffer. Of course markets are cyclical, but what this data likely means is that this cycle will take a while to play itself out. Until the economic recovery expands to include the middle class, homebuilders aren’t going to be building many mid-price homes.

Again, the news looks good for apartments. At some point that will change, but it will take over-development in the apartment sector, loosened lending standards for home buyers, a construction boom in the affordable single family home sector, or some combination of these factors for the apartment industry’s fortunes to change and any of that is likely to take a while to happen.

Homeowners and Renters – The New Integration

The Washington Post has a fascinating article about the integration of homeowner and renter communities:

Not surprisingly, as the national homeownership rate has declined, and as homes that were traditionally owned became rentals, Kolko found that owners and renters became more integrated between 2000 and 2010 in 70 of the 100 largest metros in the country. This trend was driven by the decline of neighborhoods where nearly everyone owns a home, and the steady rise of the kind of Census tracts where 20-60 percent of households are rented…

On the one hand, this means that people who are renters now have neighborhoods open to them that weren’t in the past. On the other, Kolko points to a Trulia survey last year that found that 51 percent of homeowners believe it’s important that their neighbors be homeowners, too. In other words, renters may not always be welcome, as the New York Times described in a story last summer about formerly owner-occupied neighborhoods changing in “profound ways,” portending “reduced home values, lower voter turnout and political influence, less social stability and higher crime.”

Kolko’s data suggest that few places are dramatically flipping from all-owner to all-renter. But even a much subtler change can still bring out anxieties grounded in all of the beliefs we’ve long held about each other. I’m not sure what this proximity will teach most of us — that some of the values associated with homeownership might rub off on nearby renters? That homeowners have less (or more) to fear from renters in the midst than they think? That our financial relationship to our homes matters less than it used to?

Given our modern lifestyles of dual income homes, kids who never play outside and a general decline in community participation it’s not like neighborhoods full of homeowners are all as tight-knit as they were in the past, so it’s possible that people might not know who’s a renter and who’s not. Still, it will be interesting to see if this trend changes the public’s general perception of renters, but even if it does it’s not likely to help apartment developers overcome NIMBYism. Can’t you just hear it now? “Well, single home renters are different from those apartment people.”

Rent a Family?

Want to give your model that “lived in” feel? You might borrow this idea from some realtors in Florida:

When the Mueller family sits for dinner, the leftover broccoli and crepes are already wrapped in plastic, the kitchen is beyond spotless, and the rest of the home is so tucked-away tidy it looks like they just moved in. In a way, they have: Every inch of furnishing, every little trinket and votive candle, sits precisely as designers placed it five months ago. That would make them the most perfect suburban ideal, except for one catch: This isn’t actually their home. Bob and Dareda Mueller and their three grown sons are, instead, part of an “elite group” of middle-class nomads who have agreed to an outlandish deal. They can live cheaply in this for-sale luxury home if it looks as if they never lived here at all.

The home must remain meticulously cleaned and preserved: the temperature precisely pleasant, the mirrors crystalline clear. If a prospective buyer wants to see the home, they must quickly disappear. And when the home sells, they must be gone for good, off to the next perfect place.

That they do everything an owner would do — sleeping, making memories, learning the home’s quirks and secrets — imbues an otherwise-empty home with an unmistakable energy, say executives with Showhomes Tampa, the home-staging firm that moves them in. It also helps the homes sell faster, and for more money.

Apartment Rents Rise Again Across US

From the Wall Street Journal:

Nationwide, landlords raised rents by an average of 0.8% to $1,083 a month in the quarter, according to a report to be released Tuesday by Reis Inc., REIS -0.52% a real-estate research firm. While that is below the previous quarter’s 1% increase, it is above the 0.6% gain seen in 2012’s final quarter. Rents climbed 3.2% for all of 2013.

The vacancy rate, meantime, fell to 4.1% in the fourth quarter from 4.6% in the year-earlier quarter, remaining well below the 8% peak at the end of 2009.

“Demand for apartments remains strong,” wrote Ryan Severino, a senior economist with Reis. “Not even the seasonal weakness normally observed during the fourth quarters of calendar years had much if any impact on the market dynamics.”

Wilmington Apartment Market Outpaces Other NC Cities’

Apparently things are good down on the coast:

Overall, Wilmington’s apartment market continues to trump occupancy rates in all of North Carolina’s major cities, including Charlotte, Raleigh and Greensboro.

In a July report released by Apartment Index, Wilmington’s average occupancy rate now sits at 93.8 percent. That’s slightly lower than the 94.3 percent rate reported last quarter…

Rents also remain healthy.

Despite seeing occupancy rates drop slightly, metro Wilmington’s average rents have increased from $715 per month last quarter to $760 per month this quarter. That’s up $90 from $670 per month in 2009, according to the report. 

“I do expect over the coming year the occupancy rate may fall to 93 percent, but that’s still a pretty healthy number,” Addington said. “Rents should continue to grow at 3 percent annually in Wilmington.”