California, which has seen home prices plummet by as much as two-thirds in some areas, is the top-ranked market for rental properties, a recent survey shows.
Twelve areas in the Golden State were among the top 100 markets nationwide for investors targeting rental homes, according to a report released this month by HomeVestors of America and Local Market Monitor.
“Timing is everything, and with the long-term trends in their favor, investors don’t need to jump immediately into every market,” Ingo Winzer, president and founder of Local Market Monitor, said in a press release.
Bakersfield was the highest-ranked California city on the list, coming in at No. 5. Riverside was 26th on the list. Orange County, Los Angeles and many Bay Area cities were near the bottom of the Top 100.
Nine Florida markets and seven Texas markets made the list. The report targeted the following areas as the best markets to buy rental properties, based on job growth and prices:
Tampa-St. Petersurg, Fla; Daytona Beach, Fla.; Fort Myers, Fla.; Phoenix-Scottsdale, Ariz.; Bakersfield, Calif.; Boise City, Id.; Warren, Mich.; Grand Rapids, Mich.; Rochester, NY.; and Dallas-Fort Worth, Tex.
RENTS ON INCREASE
The report coincided with figures released last week by online real estate tracker Zillow that showed rents nationwide on the increase while home values continued to decrease.
The Zillow Rent Index indicated rental prices nationwide were up 3 percent in January from a year earlier, though they actually dropped slightly from the previous month.
In the Riverside metropolitan area, rents increased 1.2 percent from a year earlier, but dropped 0.3 percent from December 2011. At the same time, home values declined 5.1 percent in January from the same period a year ago, Zillow reported.
“While it seems that rents are rising at the expense of home values, the opposite is true,” Dr. Stan Humphries, chief economist for Zillow, said in a press release. “A thriving rental market will stimulate home sales as investors snap up low-priced inventory to convert to rentals.”
According to the Zillow Rent Index, 69.2 percent of metro areas showed increases in year-over-year rent values. But home values were up in only 7.3 percent of those regions.
Meanwhile, the national non-profit organization Hope Now recently reported foreclosures in January outpaced loan modifications.
In January, 73,767 distressed homeowners received permanent loan mods while banks foreclosed on 78,734 homes, Hope Now reported. It was the first time since October 2009 that foreclosures exceeded modifications.
NEW LEASE-BACK PROGRAM
New programs have recently been launched to deal with millions of bank-owned homes and to stem the tide of foreclosures for borrowers on the brink of losing their homes.
Fannie Mae last month put its first block of 2,490 REOs up for bulk sale to investors to convert to rental properties. Nearly one-fourth are in Los Angeles, and the remaining homes are in Atlanta, Chicago, Las Vegas, Phoenix and Florida, the hardest-hit areas in the country.
And this month, the Short Sale Lease-Back Buy-Back Program, another pilot designed to stabilize neighborhoods and help homeowners avoid foreclosure, launched in California.
For homeowners who qualify, the Home Affordable Foreclosure Alternatives program now allows a homeowner to short sale a home to a non-profit organization, rent it back for three years and then buy it back at a pre-determined price.
Until recently, the HAFA program required that a short sale be an “arm’s-length” transaction, meaning the buyer and seller could not be related and could not have a prior agreement for the homeowner to stay in the property.
A March 2011 supplement to the HAFA guidelines “amends this restriction to allow servicers the discretion to approve sales to non-profit organizations with the stated purpose that the property will be rented or resold to the borrower, so long as all other HAFA program requirements are met.”
Not all homeowners qualify for the program. Borrowers must have sufficient income to afford the monthly rent payments in addition to their other debt payments. For those who do qualify, the impact could be similar to a slow-motion loan modification with a principal reduction to their loan amount.
Homeowners who don’t qualify for this program can still proceed with a traditional short sale, which may include a relocation incentive from $3,000 to as high as $45,000, depending on their lender, loan amount and individual situation.
Either option is better than a financially devastating foreclosure, which can crush a consumer’s credit, hinder their ability to find a home to rent and perhaps even impact their jobs.
Want to know if you qualify for the Short Sale Lease-Back Buy-Back Program? Call 951-778-9700 today to make an appointment for an interview.
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