The current collapse of the residential home loan industry is having a HUGE effect on the residential rental market in Santa Clarita, California.
I imagine that it is having the same effect in many parts of the country, but I am going to focus on the Santa Clarita Valley. The current state of the mortgage industry is this: THERE IS VERY LITTLE MONEY TO LOAN. I am going to give you my take on what is happening in the mortgage industry, and then what I think it is doing to the rental industry.
It is nearly universally accepted that the number of foreclosures taking place in the country today can be linked to irresponsible practices by mortgage brokers and underwriters across the country. The number of defaults on residential loans has made the resale (or secondary) market of loans a general fiasco. Most loan warehousers cannot sell there loans. When they cannot sell their loans, they have no new money to lend. That is how Countrywide ended up tapping their entire 11 billion dollar line of credit. I am not going to go into details. Suffice it to say that there is very little money to lend because the current loans cannot be sold because of the increasing number of defaults.
When there isn't enough money to lend, the banks become very selective in choosing borrowers for their money.
This means that people who one year ago would have qualified for a home can no longer qualify. The people who were waiting for the crash of the home prices are now seeing it, however, now that prices are down, they are finding that they cannot buy. These people create a very high-quality pool of renters. When you combine these people with the people who are losing their homes to short pays and foreclosures, and then combine that number with the normal pool of renters, you have a very good rental market - for the property owners.
The bottom line is this: RENTS CONTINUE TO RISE AND THE INVENTORY CONTINUES TO REMAIN LOW.
Although more and more sellers are turning to renting their homes as an alternative, the continually growing pool of renters keeps the inventory slim and homes that are priced correctly, show well, and have good location consistently rent in less that 30 days.
This is the strongest rental market I have seen in well over 3 years.
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