E-Renter News

The National Association of Home Builders reported its builder sentiment index for March is the same as February’s revised rating of 28. The leveling-off followed five straight months of increases to the highest level it’s been since June 2007. Some economists had predicted a reading of 30 for this month.

Builders expressed higher confidence in sales for the next six months. That separate index rose from 34 to 36, for the sixth straight month.

Builders continue to struggle with competition from foreclosed homes, which have driven demand for new homes down. Home prices continue to fall in many markets, forcing builders to slash prices, as well.

Other issues facing home builders are slow sales of existing homes and low appraisals that affect completion of new sales contracts. Many people are canceling deals after receiving a low appraisal on their existing homes, or holding off on new home contracts because they can’t sell their current home.

Overall, it looks like builders remain cautious but have a sense that many local housing markets are starting to move forward, and prospects for future sales are good. Still, an index of 28 is well below the 50 mark, which is where negative sentiment about the housing market turns positive.

The next housing market indicators to come are new home construction on Tuesday, existing home sales on Wednesday and new home sales on Friday.

The City of Greensboro, North Carolina has teamed up with the University of North Carolina’s Conflict Studies and Dispute Resolution Program to help landlords and tenants resolve disputes through mediation.

The free, voluntary program is intended to serve as an alternative to litigation, by helping landlords and tenants communicate more effectively, to solve issues such as security deposit disputes, noise and property damage complaints and repairs. To take advantage of the program, both parties must agree to come together and discuss the issues with a professional mediator, who works to help them define and clarify the problem, facilitate communication and come to a mutually acceptable solution.

Mediation is a popular method of dispute resolution; it is often used in divorce cases, business disputes and other potentially tense legal situations. Mediators are trained to remain neutral, reduce barriers to communication, and ensure that both parties to a dispute are heard. The ultimate resolution of a problem is up to the opposing parties, not the mediator.

The Greensboro program aims to improve long-term landlord-tenant relationships. It’s free, confidential, and can be accessed by either landlords or tenants.

The Landlord-Tenant Dispute program has the potential to save landlords a whole lot of time, expense and aggravation. It’s a smart alternative to going to court over tenant disputes. Does your community have a similar program? Maybe it should!

A new landlord-tenant bill passed in the Wisconsin state Senate today, and may make it to the governor’s desk this week, despite concerns from some Democrats, who said it opens the door for some landlords to “mistreat” tenants.

The bill changes a state law that prohibits local governments from enacting a moratorium on evictions. One opposing lawmaker said it “would even allow people to be evicted on Christmas.” The Legislature failed to add an amendment disallowing evictions on holidays.

The bill also allows landlords to dispose of an evicted tenant’s property immediately, and to continue evictions against tenants who have paid past-due rents. Opponents say these aspects of the proposed law prove it’s not in the best interest of consumers. Supporters did not speak about the bill in today’s session.

One legislator, who is a former landlord, spoke against the bill, saying it “opens the doors to business people who are tempted to rip off their tenants because they can get away with it.”

The bill now goes to the Assembly, who may act on it during the final day of the current legislative session.

According to a story in the Los Angeles Times, new data show high demand for rental housing is an early indicator of a housing market recovery.

We’ve been reporting for months that the foreclosure crisis was creating new households of renters, who are putting a squeeze on markets where little to no new construction is taking place.

A stronger job market is also contributing to demand for rental houses and apartments, as the newly-employed are able to move into their own housing, rather than doubling up with roommates, family or friends. A third group is limited to renting by difficulties in obtaining a mortgage, due to stricter lending guidelines.

The chief economist of Zillow, a real estate website that tracks rental housing and home sales, said that while home prices declined 4.6% nationally from January 2011 to January 2012, median rents actually rose 3% in the same period. In California, some markets saw flat rents, while Orange County rents increased 13.2% in the one-year period. One factor for Orange County’s big jump is a stronger employment market—unemployment there is 8%, compared to 11.8% in Los Angeles.

Other economists speculate that rising rents are a result of damaged credit from the housing crisis, which can mean tenants are required to pay a premium to secure a lease.

Investors are buying up foreclosed properties, including a recent announcement of a $450 million fund established by Carrington Holding Co. of Santa Ana, which is intended to buy distressed single-family homes to convert to rentals And the Obama administration is ready to make good on its plan to sell large pools of foreclosed homes owned by mortgage giant Fannie Mae, with the intention they will become rental housing and help to stabilize housing markets. About 2500 homes owned by Fannie Mae were recently listed for sale in some of the hardest-hit markets in the U.S.

When is a tenant justified in breaking a lease? Usually, it’s because of a default by the landlord, like broken water pipes that go unrepaired, lack of sufficient heat, or refusal to correct safety issues.

But what about a situation that is neither the tenant’s nor the landlord’s fault? In a recent case, a landlord received notice that a tenant would be moving out before the lease was up, due to her fear of her estranged husband. The tenant had obtained a restraining order, but wanted to put some distance between herself and the perpetrator.

The landlord insisted the tenant would be responsible for rent until he found a new tenant and signed a new lease. But, depending on where his rental property lies, he may be in violation of the law. Certain states have recognized that victims of domestic violence have a valid reason to break a lease, and that landlords must dismiss them from responsibility for future rent due to the end of the lease period.

Under these newer laws, tenants may be required to document any abuse and give the landlord timely notice of vacating the rental property.

It’s always a good idea to check out the laws covering tenant rights in your state and city. Things change, and you don’t want to find yourself proceeding in the wrong direction.

Researchers in California have been studying the housing market. Their findings reinforce what landlords have been witnessing over the past year or so: rental housing is on the rise as fewer people are interested in owning a home.

After the housing boom and bust, foreclosure crisis and impossible (for many) lending standards, younger people are especially cautious about owning a home. “I’d rather not be tied down,” said one 26-year-old.

Homeownership in California is expected to drop to 55% by 2020—the level it was in 1984. This is prompting officials to see what it needs to do to meet demands of future populations growth. Californians increasingly want to rent urban housing close to everything they need. With gas price hikes looming, more people want to bus, train, bike or walk to work, the grocery store and restaurants.

The California Association of Realtors said recently that only a third of homeowners who’ve sold their home are purchasing a new one—meaning two-thirds are renting.

For those in the rental property business, it looks like there could be plenty of opportunity ahead, if they can keep up with the demand.

Each year, the shareholders in Berkshire Hathaway receive a letter from founder and billionaire investor Warren Buffett. This year’s letter contained an admission that he was “dead wrong” when he predicted the U.S. housing market would begin to recover by now.

Still, he remains optimistic about the economy and housing in general, due to certain factors that he says "can’t be denied forever." For example, he wrote that the housing market will bounce back in part because “living with in-laws can quickly lose its allure.”

Some of Berkshire Hathaway’s 80+ subsidiaries rely heavily on construction activity, and have taken big hits in recent years. Clayton Homes, Shaw Carpet, and Acme Brick generated $513 million in pre-tax profits, compared to $1.8 billion during 2006, the last of the housing boom years.

While he offered no new predictions about when the housing market will really recover, Buffett said it will do so eventually and will subsequently help bring down the unemployment rate.

Last year, Berkshire generated $10.3 billion in net income, or $6,215 per share, compared to nearly $13 billion or $7,928 per share in 2010. A Class A share of Berkshire Hathaway stock traded for $118,000 earlier today.

Buffett’s predictions are often spot on, and real estate investors and landlords may play particular attention to his “living with the in-laws” comment. It’s clear that young adults won’t live with their parents forever, and that doubling up in housing will give way to more households forming as the economy keeps taking baby steps toward recovery.

Remember when landlords were offering a month’s free rent, gym memberships, free Internet and other amenities to attract the best tenants? When everyone was moving up to homeownership, rental property owners found themselves having trouble filling vacancies.

That is no longer the case in most markets across the U.S. The collapse of the housing bubble has turned the tide in favor of landlords, who are enjoying lower vacancy rates and higher rents—without the concessions they were forced to offer just a couple of years ago.

Data tracking firm MPR Research reported that in the fourth quarter of 2011 about 25% of all apartments nationwide were offering some type of concession, compared to 53% in the first quarter of 2010.

The nation’s lowest vacancy rate is in Pittsburgh, at 2.2%, where one master’s degree student indicated that apartments were much harder to find, and landlords were being stricter about tenant background checks. In Portland, Oregon the vacancy rate at the end of 2011 was 3.1%; one property manager said, “Nobody is giving concessions. That’s history.”

Renters are finding it more difficult to find affordable housing, outside less-than-desirable neighborhoods. As a result, more are looking for roommates to share the cost of increasing rents. Meanwhile, multifamily housing managers are using sophisticated software programs to determine how much rents can be increased, according to what the local market is doing.

Construction of apartment buildings is expected to soar this year—a whopping 89% over the very low numbers recorded in 2011, according to MPF Research. Still, it’s a delicate balance. Right now, the demand for rental housing is there. But as always, no one can predict how long it will last—or if multifamily housing will be overbuilt in response, leading to over supply and lower rents in the long run.

Renting has become preferable to homeownership in the U.S. for the first time in decades. This trend is expected to continue for the next four or five years, according to economists and investment strategists quoted in Bloomberg.

There are several factors contributing to this change:

Refinancing Issues
Mortgages are increasingly unattractive for banks, which make less interest income from refinancing deals. Four banks control over 60% of the mortgage market, and mortgage service firms are reducing staff levels. Refinancing is also unlikely for 8 million underwater homeowners.

In addition, second mortgages, which were a staple of the housing bubble, have made it difficult for many borrowers to qualify for refinancing. Second mortgages also have to be renegotiated, and requirements have been tightened. Once, home equity loans were as easy to get as a box of popcorn at the movies, but now they’re keeping many homeowners stuck with higher rates. With refinancing becoming more difficult, the chance to do so has diminished for many homeowners

Homeownership Rates Falling
The U.S. rate of homeownership fell to 66% in the fourth quarter of 2011. Adding in all those with delinquent mortgages or whose homes are in foreclosure (12.5% of residential mortgages) would drop that number even further, to 60.9%. Renters are expected to enter the market at a rate of 780,000 per year by the end of 2016. That’s a total of 3.9 million new renters.

Delinquency Rates Rising
More than 700,000 single family loans were seriously delinquent in December 2011. That’s up nearly 19% from December of 2010. The “seriously delinquent” rate was 9.59% in December, compared to 9.34% in November. Low down payments, tighter lending standards and high unemployment are contributing to the rising numbers. Many homeowners don’t really “own” their homes, if their value is less than what they owe, or they have second mortgages that increased their debt to value ratio. For those who paid little down, have high mortgage payments and a house whose value has plummeted, there is little incentive to pay the mortgage on time.

If these trends and predictions hold up, landlords can expect to stay busy with prospective tenants searching for rental housing in the next several years.

Smart landlords keep an eye on housing markets. More apartment building means more rental housing is on the way—which could increase the supply and lower rents. What’s happening in your area? Do you see evidence of new multi-family housing construction?

Like many municipalities, Connecticut’s cities and towns are experiencing difficulty in balancing their budgets. But one mandate intended to provide some relief is drawing quite a response from landlords and the Connecticut Association of Relators. Governor Dannel Malloy’s idea is to relieve the towns and cities that pay to store the possessions of tenants evicted by court order, by passing those costs on to landlords.

In Bridgeport, Conn., the mayor indicated the city could save $100,000 in storage fees each year. The executive director of the Connecticut Conference of Municipalities said the mandate places municipalities in the middle of disputes between landlords and tenants. The governor’s secretary of the Office of Policy and Management explained the point of the legislation is to “provide some solid monetary relief” for Connecticut’s towns and cities by shifting the “cost from local governments onto landlords.”

The bill allows cities and towns to seek reimbursement from landlords for up to 15 days of storage fees, plus an additional 15 days’ worth if the tenant asks for an extension.

When a landlord is forced to evict a tenant, usually because of a broken lease, he or she will have already incurred expenses in lost rent or damages, along with attorney’s fees and court costs. Requiring a landlord to pay for storing an evicted tenant’s belongings seems to add insult to injury.