Increase in Rental Vacancies Indicates a Positive Change in the Weather
Of late the foreclosure related housing crisis has caused innumerable evictions resulting in thousands – if not millions, being rendered homeless. During the time of the housing boom the mantra had been to own a house. This has always been the great American dream and the very basis of its psyche. The sub-prime mortgage debut was accelerated with the pushing on of this dream into an absurd reality. Those without any income credentials were sanctioned loans to buy houses. The idea was to get the money flowing from the mortgage institutions to artificially balloon up the housing industry. The shrewd thinking was that either way the lenders benefited. If borrowers remained current on mortgage loans then money would be coming in at a high rate because the value of the houses had been falsely appreciated. If borrowers defaulted then the lenders would seize the property and sell at a higher rate. The logic was based on a naïve belief that real estate prices could never come down. But this is exactly what happened.
With so many turning homeless overnight because of foreclosures suddenly the demand for rentals shot up. The greater the demands for rental the more did it indicate that foreclosures were on the rise.
Meanwhile the government at state, local and federal levels as well as the communities pitched in to contain foreclosures. There were massive relief measures. It is an ongoing process with the latest being the mother of all bailouts – the $700 billion package. It is difficult to gauge how far effective the previous efforts that have been in circulation since the last one-year is being successful. Rental vacancies can be taken as a tentative yardstick. If the rental vacancies are increasing then it indicates that the foreclosure weather clouds are perhaps clearing. It shows two things – less number of people is suffering foreclosure evictions and or sale of houses are picking up causing affordable housing to be available for the ordinary American.
Writing rental cheques does not have any benefits like tax deductions or increase in equity of the house. That is why Americans have always wanted to own houses. Rents have been the highest in New York City and San Francisco. It has risen by 6.6% since last year. In the Bay area the increase has been by 7.8%. This shows that the landlords dictate the market. In Columbus, Ohio the rents are slightly lower.
According to a survey conducted by Marcus & Millchap of Encino, California rental data was collected from 40 largest cities of America for 2007. Estimated figures for 2008 were taken including vacancy rates, new building project and job potentials. Of these three, it is the vacancy numbers that affect price rise. In the sales zone an inventory of 5% unsold units means a glut. In the rental world 5% vacancy rate point to a healthy market.
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