New Take on the "Shadow Rental Market?"

There has been much discussion about how the rise in single-family foreclosures will impact vacancy rates in rental housing nationwide, but not much press has been given to the fact that renters are actually being evicted from foreclosures these days.

Until the New York Times article that was published on November 18th.

According to a Mortgage Bankers Survey Association survey, 1 in 7 foreclosures are non-owner occupied and 1MM foreclosures are expected this year alone. This is a major dilemma for renters who are living in these homes but maybe there is a silver lining in this otherwise bad news for apartment owners: an increase in demand (renters looking for a new home) without an increase in supply (foreclosures remaining empty).

As the article points out: “Banks don’t want to be landlords, They’re in the business of making mortgages. You need to recoup the money to keep the process moving.”

It is also important to realize that many homeowners also do not want to be landlords. And there are many speculators who are just flat out abandoning the homes that they can no longer afford. In some cases these owners are selling the toilets and cabinets before they leave town.

When they are forced into foreclosure, Butera says some owners trash their homes before they are repossessed. "They are selling everything inside — their kitchen cabinets, their toilets, their AC units … and it's hurting the neighborhood," Butera said. "The house now looks like a crack house — it's missing all its windows."

It is certainly not safe to generalize that most empty homes will be coming online as rental housing.