Just when you thought you had heard enough about the economic crisis, the credit crisis, the real estate crisis, the foreclosure crisis or the construction crisis, and lately the real estate agent crisis, add one more as fallout from the others. A rental crisis is coming, as sure as the heat comes to the desert every summer.
The number of households looking to rent is going up every month as foreclosures take away their homes. While homes sit empty either not for rent or at rents higher than these households can afford, the demand for cheap apartments is on the rise.
What makes this a crisis, is that construction of affordable rental property is declining significantly, rents are going up, unemployment is going up, and those who are employed are seeing their real income fall. That adds up to a crisis.
Have you seen a tent city in your town? You may have one or more, but they simply may not be on the roads you travel.
As rents go higher and renters get poorer, despite the demand for cheap rentals, landlords are likely to be faced with potential renters that either fail credit checks or whose credit scores are far lower than they would like.
Estimates of when the real estate crisis will end are now being extended farther and farther out. When it was estimated that the real estate market in California would not recover until 2009, people thought such estimates were crazy. Now experts are predicting a turn around won’t occur until 2011 and no one is calling these experts crazy anymore.
This situation may have one silver lining. If demanded for rental properties continue, and land values continue to decline, this may be the next area of growth for California’s construction industry.
In October 2008, the U.S. Commerce Department announced that new home and apartment construction fell in September 2008 by 6.3 percent to the lowest pace since 1991. The report indicates that the housing market correction has actually gained speed in recent months as foreclosures have flooded the market.
Just when you thought you had seen the worst of the real estate crisis, it seems to have become worse again with the stock market crash. Whatever month or year people thought the real estate market would recover, we can probably push that date another six months to a year farther out and the rental crisis looming in California is likely to loom even larger.
