Rent Signs Filling Front Yards

Friday, July 4, 2008
Wendy Leung
Inland Valley Daily Bulletin

The open-house signs announcing new
tracts in the fast-growing Inland Valley have been replaced by ones declaring
bank ownership - evidence of a depressed market and depressed former
homeowners.

But there are other signs, too.
Recently, more foreclosed homes have "for lease" signs in empty
yards, and apartment buildings have signs that point toward leasing offices.

But if you're looking for a silver
lining in the rental market, don't hold your breath. A tough housing market
breeds a rental market with uncertainty, and there's no guarantee that good
news is around the corner.

With more single-family homes
becoming rental units, tenants are finding themselves with surprise bank
notices even though they've paid their rent.

"Some people are getting
burned, not knowing the house they are renting is going through
foreclosure," said Rancho Cucamonga Planning Director James Troyer.
"It happened to one resident here. It's a dicey situation."

Being behind on the mortgage isn't
something that many landlords rush to explain to tenants. That lack of
communication can leave residents shocked and suddenly without a home.

"We're seeing a lot of people
being displaced," said Jess Torres, assistant director of the Inland Fair
Housing and Mediation Board.

Some have even been duped by
landlords who try to get one more month's rent even though the bank has already
gained possession of the house.

"The tenants are on the bottom
of the food chain," he said.

Before the foreclosure crisis, the
rental market was healthy. It had steady increases in rent and high occupancy
rates.

Figures in April from apartment-data
company RealFacts put average rent in San Bernardino County at $1,177, up 2
percent from the year before. April occupancy rates in San Bernardino County
dropped nearly 2 percent from last year.

So far, the foreclosure predicament
seems to have had no serious impact on the apartment market. Conventional wisdom
was that people who lost their homes would flood the rental market, but that
hasn't been the case. Former homeowners might be leaving the area or moving in
with family, said Michael Carney of the Real Estate Research Council.

"The rental market is holding
up fairly well, but what about the future?" he asked.

Carney said the market's future will
depend on the job climate.

"The worst-case scenario is
employment falls, which decreases demand for apartments and at the same time
foreclosed homes in the rental market increase," Carney said.

Michael Reibel, a Cal Poly Pomona
professor who teaches urban demography, said significant effects of the
mortgage crisis on the apartment business might not be seen for another year or
18 months.

Some homes may be converting into
rental units now, but a prolonged crisis could mean that these conversions will
happen en masse.

"It's possible that as a large bulk of
foreclosed properties get absorbed, investors will need to operate them as
rental units," Reibel said. "That could really increase supply at
some point."

 

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