Renters Not Looking to Buy Anytime Soon, Zillow Says

For Sale For RentRenters are losing faith that they will be able to buy a home in the next year, a worrying sign that the housing market won’t get a boost from new buyers anytime soon, according to a new report by Zillow.

Some 4.9 million renters say they plan to buy in the next year, down from 5.2 million in January, according to the property-market database company.

Renters’ confidence is especially weak in strong markets, such as San Francisco and Denver, where rising home prices and high rents have made it difficult for younger buyers to save for down payments. In San Francisco, 5% of renters between the ages of 18 and 34 said that they planned to buy a home within a year, compared with 18% when they were asked in January.

As wages and job growth have strengthened, many economists expected 2015 to be the year when younger adults finally made a delayed transition from renting to owning. The Zillow survey suggests that those buyers are unlikely to emerge now until at least well into next year.

The lack of first-time buyers is worrying because without new homeowners, the housing market is just recycling existing owners and isn’t contributing to economic growth. Economist blame the stubborn absence of new buyers on the lack of more affordable inventory and struggles to save for a down payment when many are pouring a huge portion of their incomes into rents.

In contrast to pricey markets like San Francisco, in Philadelphia, where home prices are flat, 23% of younger renters said that they planned to buy in the next year in July, up from 1% in January.

“We keep hearing stories about people in San Francisco wanting to move to Portland or Seattle because they can’t afford San Francisco anymore,” said Svenja Gudell, chief economist at Zillow.

In general, confidence in the housing market is starting to wane as price growth has slowed across the country. In 17 out of 20 metropolitan areas, confidence about the housing market has dimmed since the start of 2015.

In San Francisco, 40% of respondents said it was a good time to buy, compared with 45% in January.

“I think the fact that overall the market is slowing down always scares people a little bit when they read the headline,” Ms. Gudell said.

This article originally appeared on The Wall Street Journal.

Investors snapping up new homes for rentals

apartment-sold-photo-300x200It was widely deemed a temporary play: Large-scale investors buying thousands of discounted foreclosed properties during the worst of the housing crash and turning them into single-family rentals. When home prices recovered, they would surely sell them for a hefty profit. The housing market is recovering, albeit more slowly than expected. Foreclosure volume is way down and home prices are way up, but these investors are not selling.

They are buying more, and now they are buying new.

“I actually think that we’re coming into perhaps the most compelling three or four years that I’ve seen since I’ve been in the business,” said Doug Brien, CEO of Starwood Waypoint Residential Trust.

Brien, standing in front of one of his company’s rental homes in a brand-new housing development in Lawrenceville, Georgia, near Atlanta, says builders are the next frontier for institutional investors.

“For us operationally, being able to have a brand-new home that typically has a warranty, that works well for us. We can also customize floor plans that work for the business,” added Brien.

Starwood Waypoint, which launched its business seven years ago, now owns more than 16,000 single-family rentals, the vast majority of which were foreclosures. So far it has purchased about 200 brand-new homes from builders, with an average price point of around $180,000. These homes represent about 5 percent of the REIT’s portfolio.

“I think the institutional capital is still looking at this very carefully, because there’s a belief, and I support that belief, that it is a long-term hold and there’s yield and there’s appreciation to be had,” said Tim Sullivan, practice leader at Meyers Research. “But the real challenge for capital now, for the institutional capital sources, is that the massive low-lying fruit is gone.”

That fruit, cheap foreclosures, offered investors a relatively low-risk play, because they could buy homes at well below the cost of replacement, and not only would they see rental revenue but also property price appreciation. As this new interest develops, however, builders are starting to offer institutional buyers bulk discounts. Not only does it help builders grow revenue, but it gets them closer to normal levels of production, which has been a real struggle thus far.

Miami-based Lennar, one of the nation’s largest homebuilders, is experimenting with the single-family rental market itself. It made a smart hedge during the housing crash by putting up multifamily apartment buildings. It now has 20,000 apartment units under construction, according to company reports. This year Lennar took that one step further, opening its first single-family rental community in Sparks, Nevada.

“One of the big criticisms of the single-family rental world is that they’re all kind of one-offs in unique locations with unique amenities. The scalability of the management is what gets it complicated. This makes it much more like an apartment community in that it’s all together and can be managed by a single entity,” said Stuart Miller, Lennar’s CEO.

Miller said Lennar will probably start another rental community, or possibly two.

“I’m surprised more builders haven’t already taken the plunge,” said Sullivan.

This article originally appeared on CNBC.com.

Ask the Attorney: Tenant Breaching Contract and Vacating Early. Wishes for Additional Copy of the Lease.

AttorneyThe Landlord Protection Agency® presents John Reno, Esq., a highly experienced Landlord – Tenant attorney based on Long Island, NY.

Q:  Dear Mr. Reno:
Ursula & we reside in MN. We have a tenant in a 3 year lease on our home (we only have 1 rental property) who now wants to break the lease 8 months early because they have bought a house (without notifying us or asking prior). We are going into the worst time of year in our region (ie fall / winter) to try to release the home & do not want to accept it, esp because they have offered nothing to mitigate the hassle factor.

They are now claiming they never received a copy of the executed lease, when they absolutely did the day they moved in. It is in my best interests to simply provide it or would we have the option to not provide a new copy telling them it was their responsibility to keep their copy of it for reference or charge a fee for making new copies & mailing? We don’t want to be improper in our response to them but have no prior experience in these two issues. Many thanks in advance. I am grateful to have found this site & impressed with the information I have been reading. Have a great weekend & thanks again. – Ursula in MN

A:  Fork it over. If that comes to court and you refused a lease, you’ll look like the bad guy. And what are you afraid of? The lease backs up your position.