Foreclosures and Distressed Listings Drive Demand for Rentals- By: John Cutts
According to housing market analysts, the rise in the number of properties falling into foreclosed and distressed listings has escalated demand for apartments and other forms of rental housing in the U.S. The trend is highly evident in metro areas like Seattle, Washington.
The rising number of Seattle foreclosure listings has reportedly scared off most people from homeownership, with most of them thinking that chances for property appreciation will be next to nothing as values of homes continue to tumble. Analysts also stated that most Americans are finding it more prudent to rent apartments than buy a home in a market where most mortgages are underwater.
Taking advantage of expanding foreclosure listings in Washington, several apartment developers have come to metro Seattle to build apartment complexes, including Bentall Kennedy, which is set to build a luxury apartment building that will be comprised of 654 units. Apartment builders have stated that rental rates will increase in the next couple of years, a development that will provide more returns to the apartment market. Other developers, such as Parker's and AvalonBay Communities Inc., are also taking advantage of the higher demand and have started projects in various areas of the U.S.
The U.S. Commerce Department has reported that multifamily home construction activities have increased by 78% last month compared with December 2010. As distressed listings and foreclosures continue to rise, apartment building activities soar to a yearly pace of around 183,000, which is the highest figure recorded for the segment since the second month of 2009. Meanwhile, construction activities in the single family dwelling market declined by 1% over the same period.
Housing industry experts stated that the continuous rise in foreclosed homes listings has forced a lot of owners to rent and has discouraged homeownership in most areas of the U.S. Homeownership in the country has declined to 66.5% as of the end of last year from the 69.2% peak recorded in 2004.
Distressed listings posted higher numbers in the 2010 fourth quarter, resulting in the nationwide foreclosure rate to reach 4.63% in the last quarter of 2010. With so many foreclosed properties around, industry analysts expect renters to increase by around one to 1.5 million in the coming few years.
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John Cutts has been educated in the finer points of the foreclosure market over 5 years.