Americans Caught By Rental/Credit Squeeze
One night last spring, David Hall returned home to his studio
apartment outside Boston to learn that his monthly rent had spiked from
$725 (U.S.) to $995.
It would be much cheaper for the maintenance
manager to buy a nearby starter house than to stay put. But his mortgage
broker told him that while his credit score was good, it was not high
enough to meet banks` tough standards, he said.
With credit tight, many consumers have no choice but to rent. Others who
can afford to buy are also renting, because they view real estate as a
lousy investment (irony). As demand has increased, rents in some cities have
jumped by double-digit percentage rates.
`We have falling incomes, rising rents and nothing but substantial
upward pressure on those rents,` says Chris Herbert, director of Harvard
University`s Joint Centre for Housing Studies. `And nothing in the
cards suggests it will turn around anytime soon.`
A recent Morgan Stanley research report states that the average credit
score is 762 for a consumer securing a mortgage backed by
government-sponsored enterprises like Fannie Mae. But 65 per cent of
Americans have scores below 750.
Consumers who cannot buy must rent, and that is where many Americans are
feeling the pressure. A rent index from real estate data provider
Zillow shows year-over-year gains for 70 per cent of the U.S.
metropolitan areas, while its home value index rose in only 7.3 per
cent.
Only a few years ago, landlords in cities like San Francisco and New
York were tossing in a month or two of free rent, sometimes with
parking, to lure tenants into signing leases.
Today, applicants
are showing up at apartment viewings with copies of their unblemished
credit reports and letters of recommendation from bosses and prominent
friends, in the hopes of snatching up a place to rent.
Equity
Residential, one of the biggest apartment owners in the United States,
has more renters with high credit scores than ever, vice-president of
operations David Santee said on an April conference call with analysts.
http://www.theglobeandmail.com/report-on-business/economy/housing/americans-caught-by-rental-credit-squeeze/article4392820/
Disclosure: Just put in another bid on a short sale property in Phoenix, AZ. Price isn't as good as what I was buying similar properties for in 2010 and 2011, but it should cash flow well nonetheless. I informed the bank that if they counter at a price higher than my bid that I will walk. #notbluffing