As part of my small “portfolio” of real estate investments, I’m in the process now of renting an apartment out. It’s one of those little things that can be annoying, but it’s generally worthwhile to do it yourself rather than pay someone else to do it, unless you have a LOT of properties. In that instance, showing apartments and managing them would be a full time job. At any rate, I’m always thinking about the effects that one factor has on others and now I’m wondering about how the latest mortgage upheaval and the home buying slowdown affects the residential rental market.

The mortgage situation right now is, of course, not quite what it was a year or two ago, but rates are still quite good. The only snag there, from what I can tell, is that those with marginal credit are going to be out of the loop or at least will have to pay higher rates then they were otherwise during the “unwise lending period”, as I’ll unofficially call it. No doubt the market is going to cut some people out and others will pay higher rates. In this sense, things are good but not ideal for buying a home.

On the other hand, home prices have come down quite a bit in some markets and at least a bit in almost all markets nationwide. Part of this is the slight tightening in the lending industry as well as the slight increase in rates. Another part is that houses were overpriced anyway - not a bubble, in my opinion, unless low-end mortgage lenders have managed to create one with bad loans - the jury is still out on that. Now, houses are expensive, but not AS expensive and getting a loan isn’t too difficult, but it’s more difficult than it was last year.

What I’m guessing this all adds up to is that many would-be first-time homebuyers are still going to struggle to scrape together the funds for a home purchase and others are going to continue to rent rather than buy because of credit issues, tightening lending policies and a simple dearth of cash on hand.

But there’s still another factor at play. Many investors who were trying to sell homes that they had held onto for a short period of time (or who bought, fixed and planned to sell) have been caught holding onto properties that they can’t sell for a profit. Many have turned to the rental market to allow them to weather the “housing storm” until housing prices go back up. So while still-high home prices and more stringent lending criteria are forcing many to rent, lowered home prices are causing some owners to lease out their properites, leaving more available properties on the market, greater choice for would-be renters, and a downward pressure on rental rates. Add to that the fact that many entering the real estate rental market as landlords may not be all that familiar with rates and just want to conver their mortgages until they can sell.

As is always the case, any economic analysis is complicated by a multitude of factors and, of course, human beings, who are quite unpredictable and don’t fit neatly into any scientific analysis.  Bottom line is that I think it’s a wash, though right now I’m in week 3 of renting an apartment that took me 5 days to rent last year, so I guess I’ll see how this all plays out one way or another, huh?

Tags: apartment rental, first time homebuyers, real estate investment

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