Intuitively, it would make sense if the cost of owning or renting a home plummeted along with residential real estate prices.
But even though equity in and around Bakersfield has all but
vanished, what residents are actually paying for a roof over their head
hasn't budged much.
Banks have been slow to modify home loans even though more than half
of Bakersfield mortgages are under water. Most homeowners who bought in
or shortly before 2006, then, are stuck with mortgages that reflect the
market peak.
Those who have lost homes to foreclosure aren't finding the rental market much better.
Average asking rent in the Bakersfield area was $832 in the third
quarter, according to RealFacts, a real estate data firm based in
Novato.
That's down 3.5 percent from the same quarter last year, not even close to the decline in home prices.
For some perspective, consider that the median home price in
Bakersfield in October was $139,000, down 13.1 percent from a year
earlier.
Suzanne Schneider, 50, said the cost of a place to live is still too high.
More than half of her monthly pay goes to lease a small, two-bedroom house in east Bakersfield.
"Especially for someone like me on a fixed income, you can't afford
to live comfortably and still have more than just the basic
necessities," she said. "The budget's a little snug."
Nancy Winn, 53, lives in Green Gardens Apartments, a complex in the southeast for low-income people with mental health issues.
Winn would like to move out of the complex, which charges rent on a
sliding scale, but she says it's hard to find something affordable at
market rate.
"There are a few little places in OIldale. I've been checking the
paper," she said. "But there's not much. I want to have a little left
over after rent in case I want to buy a lamp or a rug or a little
something for my grandkids."
Rents largely unchanged
Rents have fallen slightly, but not enough to give struggling
tenants much relief, said Dean Preston, executive director of Tenants
Together, an advocacy group for renters.
"We're coming off such exorbitantly high rates to begin with," he said.
Single-family home rentals seem to be more responsive to market
conditions than apartments, said Stephen Pelz, executive director of
the Housing Authority of the County of Kern.
"On the multi-family side, they've mostly stuck with the same rates,
but they're offering incentives to move in, like first month free and
things like that," he said.
Senior Serve, a Bakersfield social service agency that manages the
budgets of the elderly and disabled, said many landlords raised
clients' rent when they learned Social Security checks were increasing
slightly.
"When the federal government rescinded that increase, we went back
to our landlords and asked them to lower their rent. Some did, some
didn't," said Senior Serve executive director John Marshall.
One of the reasons rents haven't moved much is that demand for rentals is as strong as ever, Preston said.
A few years ago, those who couldn't afford to buy were forced to
rent. Now the cost of owning is lower, but some would-be borrowers
remain on the sidelines.
Banks are releasing their foreclosed inventory to buyers at a snail's pace, limiting available inventory.
Then, too, tighter lending standards have made it harder for those with imperfect credit histories to get loans.
Demand still high
At the same time, former homeowners fleeing foreclosure are flooding
the rental market, so landlords aren't having much trouble finding
tenants.
The conventional wisdom among financial planners is you should spend
no more than a third of your monthly income on rent or a mortgage.
Yet many people are paying half or more, said Katy Hudson, president
of Consumer Credit Counseling Service of Kern and Tulare Counties.
When people in that situation are owners, not renters, it's
extremely hard for them to get out from under that burden, Hudson said.
They can't sell the house for what they owe on it, and banks are "still extremely resistant" to modify loans, Hudson said.
"Banks are telling us that they're loosening up, and we're seeing
that a little bit, but not as much as we would like, for sure," said
Steve Goddard, president of the California Association of Realtors.
Hudson refers clients who are under water to the Obama
Administration's Making Home Affordable program. But critics note that
the program has only assisted a fraction of the distressed homeowners
who need help, and Hudson said even those who get a modification often
still lose their homes.
"Sometimes you're talking about homes they couldn't afford in the
first place, so no matter how you try to reammortize it or drop the
interest, it's just never going to get to an affordable monthly
payment," she said.
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