Renters’ Market for Real?
The News explores the phenomenon of would-be home sellers putting their houses and condos up for rent when they can’t attract buyers, which has led to twice as many properties listed for rent this year than last year.
Real estate agents said the rise in home rentals is occurring throughout the state, and with no end in sight for the sluggish economy, it’s likely to get worse before it gets better. (Emphasis ours.)
Worse for whom? Well, according to one of the renters they quoted in the story…just kidding! Renters’ perspectives sought out in a story about the A2 housing market — that’s a good one.
C’mon, AAIO, since when does anybody ask the opinion of people on the lower end of the income scale? Renters are usually, but of course not always, on the low side of that measure. But yeah, clearly, homeowners loss is renters gain in this very sluggish market.
posted by LittleB on May 28th, 2007 at 9:01 am eI’m curious about this. Is there any indication that rents are dropping as a result of this? Or are they staying artificially high?
The article indicates that houses are being rented for at or below mortgage rates, but how does that compare with normal rental rates in these particular neighborhoods?
Previous AAIO posts seem to indicate that landlords in the Deuce propagate the myth of a housing crunch so that they can keep rents up while demanding early decisions on continuing leases. I’d be surprised if the normal rules of supply and demand affect that.
posted by dcwp on May 28th, 2007 at 2:20 pm eI bet most of these are zoned so as not to allow a certain number of unrelated people to live there, or in any case the owners wouldn’t be interested in renting to a bunch of roommates, but they may help decrease the pressure on rental housing overall. I too would be interested to see if this happens.
And the housing crunch hyped by the landlords does mostly exist; the rules of supply and demand are mostly thwarted by an artificially low supply.
posted by ann arbor is overrated on May 28th, 2007 at 2:32 pm eJust a thought: as foreclosures skyrocket and professionals, families, retirees, etc., who had been in the homeownership game are forced to rent, won’t there be added demand for rental properties, leading to higher rents in the short-term?
posted by sheldon on May 28th, 2007 at 5:51 pm eYou would think the real estate prices would be going down because of this too like they are in other towns, but no they either refuse to lower the price or they switch to renting out like you said.
posted by sam hack on May 28th, 2007 at 9:47 pm eWhen the market rent for an ordinarily rentable house is significantly less than the mortgage payment needed to buy it, you probably have a bursting real estate bubble. Departing owners may hold out for a while, continuing to pay the hefty difference between rent received and mortgage paid, but unless something happens to make the house suddenly much more attractive, eventually they will give in and sell.
In other words, Ann Arbor house prices HAVE declined, and are expected to decline further.
Rental rates react more quickly to market conditions than house prices. I haven’t been following the want ads, but I’d say this is a good time to be finding a place to rent in Ann Arbor.
When landlords offer “two months free rent” and “no security deposit” and other such specials (and I see signs for these all over town), those are forms of price reduction, and reflect the fact that rents generally are under downward pressure. Ex-homeowners who need to find tenants will have to take lower rents if they refuse to rent to “a bunch of roommates”, and since lots of other places are plausible for multiple categories of tenants, that bids down rents across the board.
Sheldon, yes, the number of foreclosures is up tremendously, but the numbers are still small relative to the total market. And a household which loses a house in Ann Arbor is likely to end up moving to another locale where housing is cheaper and/or jobs are more available.
I agree with AAIO’s point that the perspective of renters is rarely considered. Still, it wouldn’t be considered nice for, e.g., financial papers to headline a stock market crash with “GOOD NEWS! STOCKS ARE CHEAPER TO BUY!”
posted by Larry Kestenbaum on May 29th, 2007 at 4:41 am eReal estate prices are coming down. You can get stats at the Board of Realtors site. For example, the average residential sale price for sales in Apr ‘06 was $265,917. In Apr ‘07, it was $250,971. Number of sales is down too: 250 in Apr ‘06 (avg 85 days on market), 225 (avg 87 days on market) in Apr ‘07. Lots more reports at the site; good for looking at trends if you’re so inclined. [Stats based on information from the Ann Arbor Area Board of REALTORS® Multiple Listing Service for the period April 2007.]
posted by Laura on May 29th, 2007 at 8:37 am eGee, I’m sure glad I bought a house at the very top of the market.
But in other thoughts… Haven’t those “two months free rent” and “no security deposit” deals been around for a while? At least with McKinley and the really big companies? We were renters for a long time before buying and I know that we considered those deals many times and finally even moved in on one in 2005. If memory serves, there is a certain amount of price reduction that comes with those, but they make up for some of it elsewhere. I won’t ever live in a McKinley property again if I can help it.
posted by dcwp on May 29th, 2007 at 9:05 am e2005 is not a long time, though. When we moved here in 1993, the rental market was insanely tight, maybe 2% availability.
Of course, back in those Dark Ages, realtors weren’t allowed to put up a sign advertising a house as for sale, either. And yet, houses sold in days. This was before all the condos and suburbs out by Target. Heck, that was before Target.
posted by Chris on May 29th, 2007 at 9:53 am eBased on the Proposal A tax laws that have been in place it’s worse for everyone when houses don’t sell…That’s the only time they become uncapped and you can see a real boost in the taxes collected on the property. Hence communities are relying either new construction (which there is some in a2 but mainly redevelopment of sites that are in the DDA which collects much of the growth in taxes) or on turnover of existing homes to keep their tax base growing. Therefore a drop in sales of homes, makes for fewer homes coming un-capped in their tax value forcing the city to cut services….which most likely will first affect lower income residents…which often times are renters.
posted by andy on May 29th, 2007 at 12:47 pm e“That’s the only time they become uncapped and you can see a real boost in the taxes collected on the property. Hence communities are relying either new construction (which there is some in a2 but mainly redevelopment of sites that are in the DDA which collects much of the growth in taxes) or on turnover of existing homes to keep their tax base growing.”
Yes, but on the other hand, even as home values decline, taxable values of ‘capped’ homes continue to rise. The effect has been to smooth out property tax revenues, so that they didn’t rise as fast as they would have during a boom market, but they’re not falling now during a declining market.
I guarantee that if the city’s revenue had increased as fast as its real-estate values during the last decade, those higher revenues would all have been built into the city’s expense structure, and we’d be facing worse problems than we are now.
posted by Anonymous on May 29th, 2007 at 3:06 pm e“That’s the only time they become uncapped and you can see a real boost in the taxes collected on the property. Hence communities are relying either new construction (which there is some in a2 but mainly redevelopment of sites that are in the DDA which collects much of the growth in taxes) or on turnover of existing homes to keep their tax base growing.”
Yes, but on the other hand, even as home values decline, taxable values of ‘capped’ homes continue to rise. The effect has been to smooth out property tax revenues, so that they didn’t rise as fast as they would have during a boom market, but they’re not falling now during a declining market.
I guarantee that if the city’s revenue had increased as fast as its real-estate values during the last decade, those higher revenues would all have been built into the city’s expense structure, and we’d be facing worse problems than we are now.
posted by mw on May 29th, 2007 at 3:06 pm eMy post wasn’t a comment on Prop A…rather a statement that with Prop A any slowdown in housing sales creates a slowdown in revenues for the city. Combine this with the state’s uncertain budget situation leading to at absolute best flat revenue sharing and more likely a decline in that area…it is beneficial to all residents, yes even renters, for house sales to pick back up.
The increase in taxable value of a capped home does not equal the increase in health care/fuel expenses the city has to pay.
posted by andy on May 29th, 2007 at 3:46 pm e“The increase in taxable value of a capped home does not equal the increase in health care/fuel expenses the city has to pay.”
That’s true — but it’s still better than tax revenues actually declining in step with the decline in real estate values.
posted by mw on May 29th, 2007 at 8:03 pm e