Fading American dream of homeownership fuels rentals
As the housing market collapses, many would-be homeowners are forced to rent.
— -- Chris Ervin is renewing his lease at the Kirkway Apartments outside Detroit. He and his wife, Rachel, are thinking about moving out of state, and they know that if they bought a house now, it could take six to nine months to sell it because the area's real estate market is so depressed.
But even if they wanted to buy a home, Ervin doesn't think they could qualify for a loan now that so many mortgage lenders have raised interest rates, tightened their standards and axed loans for people with bruised credit.
"The market's gotten really tight," says Ervin, 30. He should know. He's a mortgage broker.
"There's a whole segment of the market right now that can't buy. People are pretty much being forced to rent," Ervin says. "Our credit is not the greatest; we'd probably be in that segment right now."
But there's another segment of the market that's increasingly being forced to rent: people who are losing their homes through foreclosure. Five people moving into the 218-unit Kirkway Apartments in coming weeks have lost their homes through foreclosure, says Cathy Lombardo, director of property management for the Lombardo Cos., the property owner.
"We have had really strong activity in the last few months, and I really think it's due to the foreclosures," she says.
The company has started marketing to homeowners who have fallen behind on their mortgages. It's also offering moving assistance for prospective tenants facing foreclosure.
Tougher times ahead
The turmoil in the mortgage market, on top of the shortfall in apartment construction, means that the market for renters could become tighter over the next three to five years than it's been since 2000, says Hessam Nadji of Marcus & Millichap Real Estate Investment Services.
During the real estate boom, a record number of renters bought homes as interest rates fell and lenders eased their standards. Now, the reverse is true. If the homeownership rate falls over the next two years from 68.2% back to its 2002 level of 67.9%, Nadji estimates, it'll translate into 2.3 million households entering or re-entering the rental market.
