Rental Inventory Grows By Thousands. Rent Prices Fall.
Tampa Bay, October 26, 2011. In the midst of the housing downturn, one segment of the market has seen remarkable growth – home rentals.
What was once just a small segment of the local housing market – representing barely 2,000 homes in 2006 – has seen a six-fold increase since the downturn began. “We’re on track to see over 12,000 private homes rent out this year in Tampa Bay,” commented Vitaliy Vosmak, Real Estate consultant and property manager with Home Encounter, the Tampa real estate consultancy that tracks housing market data for central Florida.
The findings are significant. Private rentals when combined with pre-foreclosures and unlisted foreclosures represent the “shadow inventory” – a supply of unsold homes that can impact the recovery of the housing market. In the case of rentals, this shadow inventory has ballooned to huge numbers as homeowners choose to rent instead of sell, and investors continue to snap up cheap foreclosures.
“It’s a segment of the housing supply that barely existed 5 years ago,” commented Vosmak, “but now it’s a major player in the housing market. It has a direct impact on both short term rent-rates and long term home-values.”
Experts have long predicted that the near 40% decline in home values since the market peak in 2006 would draw investors into the market and would force home owners who can’t sell to become landlords. Home Encounter’s findings seem to support that conclusion.
“45% of all home sales over the last 2 years were to all-cash buyers” commented Vosmak, “and a large portion of these were investors. Add to this the homeowners who haven’t been able to sell because their homes are underwater and you can see how private rental inventories would have skyrocketed.”
The burgeoning increase in private rentals has been a boon for many Bay Area renters. Median rent prices in the Bay area in the third quarter of 2011 are down more than 11% from their peak in 2006 to $1,150 per month. “Rent rates have fallen right along with home values, and that's a huge benefit for renters” commented Vosmak. “Renters also have much more choice today because of the growth of the private rental inventory. They can have their pick of beautiful homes in desirable communities, which before the downturn were only available to buyers.”
But the falling rent rates are bad news for home owners and investors, many of whom are already underwater on their home values. Home owners who turned to renting instead of selling have seen their rental income fall, even as demand for rental homes increased. “Demand increased, but supply increased by much more, thanks to foreclosures” commented Vosmak. “So landlords have been unable to hold their asking prices.”
And investors who were hoping for sizable returns on their cash investments in Tampa Bay haven’t seen the rent rates that they were hoping for either. Home Encounter, who manages over 1,300 investment properties through their property management division reports that investor expectations have been mixed. “Investors are happy with their buy-prices, but many are disappointed that the greatest rental demand we’ve had in years isn’t forcing prices higher” commented Peter Murphy, who heads Home Encounter’s investment division.
The trend is showing no sign of abating. 1,500 homes were purchased with cash in Tampa Bay last month, according to Home Encounter. That’s 48% of all sales in September, and many of these cash purchases are expected to make it into the private rental market. According to Vosmak, that level of growth is one of the reasons why private rentals will impact the housing market for many years to come.
About Home Encounter: Home Encounter is a full-service Real Estate Consultancy based in Ybor City, offering Real Estate Brokerage Services, Investment Real Estate Services, Property Management and Real Estate Consulting Services. It was founded in 2006 by two University of South Florida MBA students, and today is one of the fastest growing providers of real estate services in Tampa Bay, due to its technological innovation and focus on the business, profitability and economics of real estate.
About HomeSalesStats.com: Home Encounter’s analysis of the housing market is based on statistics provided by HomeSalesStats.com. HomeSalesStats.com, created by Home Encounter founder Peter Murphy, aggregates MLS sales to provide statistical analysis of the central Florida housing market. The online statistical analysis tool provides super-customizable graphs and charts to help people see how various factors impact real estate values.