South Florida’s rental housing market is booming.
Foreclosures and price declines have many residents leery of homeownership or unable to qualify for mortgages. Therefore, South Florida’s rental housing market is booming.
There are fewer empty rental apartments in Broward and Palm Beach counties this year over last year and rental rates are higher. Some new renters are former homeowners who have lost their properties to lenders, while others don’t want to be shackled to homes in an uncertain economy.
According to top analysts, turning renters into buyers is critical to solving the nation’s housing woes, analysts say. However, even young professionals who have never owned appear to have soured on the prospect of buying homes and prefer to rent.
Tara-Nicholle Nelson, a spokeswoman for Trulia.com, a San Francisco-based real estate research firm, states: “Their whole adult lives they’ve seen foreclosures and people dismayed about the values of their homes. They will continue to rent even after they can afford to own.”
Melissa Melzer, a 32-year-old lawyer, recently renewed her lease at the Mizner Court Apartments in Boca Raton, where she has lived for nearly three years. She’s not opposed to ever owning, but she doesn’t think the time is right, despite affordable home prices and historically low mortgage rates. She states: “Everybody says this is the best time to buy, but it’s a double-edged sword. You could lose your job tomorrow. You just never know. If I’m renting, I could walk away if I have to. If I own, I have a problem.”
The recent foreclosure freezes by major lenders also could cause more people to postpone homeownership. As banks suspend sales of foreclosed homes over paperwork concerns, prospective buyers have yet another reason to hold off.
According to Reinhold P. Wolff Economic Research in Oakland Park, South Florida vacancy rates are as low as they have been in three years.roward’s apartment vacancy rate in August was 5.5%, down from 6.8% in August 2009. Palm Beach County‘s August vacancy was 5.1%, compared with 7.6% a year ago. Declining vacancies allow building owners to increase rental rates. Broward’s overall average rent for apartments in August was $1,228, up 2% from a year ago. Palm Beach County‘s average rent also increased 2% over the past year, to $1,153.
Demand for three-bedroom apartments is particularly strong, fueled in part by former homeowners who are used to having extra space. Some have been through foreclosures, while others have negotiated short sales, in which they unload their homes for less than the amount of their mortgages.
Real estate agents claim that many former homeowners still prefer to move to another home. And there is no shortage of single-family residences and condominiums for rent.
The shift toward renting prompted Damien Barr and other real estate agents to start KangaRent, a brokerage that specializes in South Florida rentals. The Palm Beach Gardens-based firm opened Aug. 1. He states: “If you’re a landlord or a homeowner and you have a place to rent and it’s not renting, it comes down to price.”
Jill Baker and her husband and their two children rent a four-bedroom ranch house near Coral Square Mall after moving to Coral Springs two years ago following a foreclosure in Atlanta. The landlord pays for pool and lawn service. Baker, 36, said she’d like to own again someday but is content for now. “It’s pretty stress-free,” she said.
Because of the avalanche of foreclosures during the past four years, individual landlords are becoming more lenient with tenant applications. Landlords are more willing to overlook poor credit and instead focus on a tenant’s employment history and current ability to pay.
Friedman, an investor who rents homes across South Florida, bought his investment properties at reduced prices, so he’s able to easily find tenants whose rent will cover his mortgage payments. But homeowners who bought at the height of the housing boom in 2004 and 2005 worry they won’t be as fortunate. He states: “I’m more interested in what’s going on today. Credit scores don’t predict the future.”
Friedman’s Fort Lauderdale real estate agent, Jack Clark, saw the growing trend of former homeowners turned tenants and suggested Friedman accommodate them as a way of renting the homes more quickly. In the past, Friedman asked for first and last months’ rent and a security deposit, so a renter would have had to shell out about $6,000 to move in, Clark said. Now he asks for the first month’s rent and security or lets the tenant pay the security deposit in installments. Clark states: “It makes business sense. People coming off a short sale or a foreclosure don’t have the cash.”
James Wells, a 52-year-old architect, paid $186,500 for his Miramar townhome in 2004, but it’s now appraised by Broward County at $103,140. With jobs for architects more common in places like San Francisco and Boston, Wells said he wouldn’t be able to rent his Miramar digs for anything close to his $1,800 monthly mortgage payment. If he chose to rent it, he would lose money each month and be forced to live in a studio apartment on a strict budget in a new city. He concludes: “How do you advance in your career when there is no rental market to sustain you?”
