Reluctant landlords creating shadow market

John Rebchook — Thu, 25 Jun 2009 22:06:23 +0000

There is a growing “shadow market” fueled by reluctant landlords who are unable to sell their homes in this tough market, an owner of a residential property management company told InsideRealEstateNews.com today.

“These are the people who are renting their homes by default,” said Robert Alldredge, owner of Jericho Properties Realty in Lakewood. These are people who tried to sell their home, but have been unable to sell it for their asking price, he said. Rather than continue to drop their asking price, they rent it.

Typically, he sees people losing $200 to $300 a month when they rent their homes under these circumstances. That, of course, is far preferable to lose $1,500 to $2,000 each month on a mortgage.

“It’s hard to get a handle on the size of this shadow market,” he said. “Their hope and goal is that they can wait out the market and sell their homes for a profit later. Today, if they tried to sell it, it would be a short sale.”

Housing rental vacancy rate rises by 33.3 percent

John Rebchook — Thu, 25 Jun 2009 21:57:26 +0000

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This headline may have caught your attention.

But it’s no call to be alarmed.

The housing rental vacancy rate in the Denver area rose to 3.6 percent in the first quarter, compared with 2.7 percent in the first quarter of 2008. A little more than a one percentage point increase doesn’t sound like much, but when dealing with such small numbers it is actually a large percentage change – 33.3 percent, to be exact.

But Gordon Von Stroh, the professor with the Daniels School of Business at the University of Denver, who authored the report for the Colorado Division of Housing, is not concerned by the big percentage increase. For one thing, a 5 percent vacancy rate is generally considered a market in equilibrium where supply and demand are balanced, and the vacancy rate is still well below 5 percent.

Still, the housing rental market is different than the traditional market, Von Stroh notes.

“If you have 10 homes for rent and two of them are empty, that can be financially devastating,” Von Stroh said. “But if you have 100 multifamily units and three of them empty, that is not a big deal and is expected at any given time.”

And while the owner of a large apartment community can offer incentives such as free rent, the individual owner typically quickly drops the price of a home to rent it, Von Stroh said.

Inside Real Estate News » Rental real estate

Reluctant landlords creating shadow market

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Housing rental vacancy rate rises by 33.3 percent

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