Mortgage meltdown: Now the rents

More fallout from the current housing slump - the cost of renting a home stagnated in 2007, according to an exclusive report for CNNMoney.
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See all CNNMoney.com RSS FEEDS (close) By Les Christie, CNNMoney.com staff writer
January 17 2008: 3:34 AM EST


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Special Reportfull coverage

Mortgage meltdown: Now the rents
Builders' confidence edges up from record low
Cleveland sues lenders over subprime
Housing: No room for bulls


NEW YORK (CNNMoney.com) -- Home prices dropped last year in most cities around the nation, and now rents are flattening out in many of the markets worst hit by the housing downturn.

According to data from Investment Instruments Corp. generated by their Rentometer.com site and supplied the data exclusively to CNNMoney, the median monthly rental bill for a sampling of 10 metro areas all around the United States rose just 0.5 percent in 2007 from $1,457 to $1,465.

Rentometer, which publishes rent-comparison statistics online, does not have historical rent data prior to 2007, but according to real estate consultant M/PF YieldStar, national rent increases had averaged between 2 and 3 percent annually the previous several years.

Home prices post record decline
"The major factors having an impact on housing prices are foreclosures, which make more rental property available," said Owen Johnson, president of Investment Instruments, "and also foreclosures that are not happening."

In the latter case, according to Johnson, many speculators bought properties to "flip," selling them quickly in a rapidly appreciating market. In some Sun-Belt areas, investors bought condos and other properties while they were still in development, to sell when a project finished.

Other investors bought existing single-family homes or other properties, intending to do cosmetic improvements and then sell them at a profit. But before they could do that, the slump hit, and home values dropped. Instead of selling at a loss, investors of all stripes are now renting them out.

Of the 10 areas sampled by Rentometer, Atlanta and Houston rents declined the most, plunging 12.8 percent for the year. Median monthly rent for all rentals in Atlanta is now $884, and in Houston it's $779.

The New York metro area had the highest median monthly rent in 2007, at $1,729, and it posted the biggest increase of 12.8 percent. San Francisco, where it grew 8.5 percent to $1,685, and Boston, where it rose 6.8 percent to $1,528, also had strong years.

San Francisco and New York are examples where Johnson said "massive demand" more than offset increased supply. These cities compete in a "global market," he said, and, by world standards, they're still relatively inexpensive for foreign currency-based consumers taking advantage of a weak dollar.

Other cities reporting big declines included Washington (11.8 percent), Miami (9.0 percent) and Phoenix (7.3 percent).

Housing: No room for bulls
There are unique dynamics to the rental market, according to Johnson. Rents rise and fall independently of home prices. And there's often a push-pull to rental amounts: They're pushed up when foreclosures put homeowners back in the rental market but pulled back because the supply of rentals increases.

And, while national figures tend not to be too volatile, local markets can record large swings, as they did in 2007, when four of the 10 markets covered recorded double digit gains or losses.

Sometimes small events can leverage large changes, according to Johnson. "If MIT opens a new dormitory, for example, it can decrease rents substantially all over the Boston area," he said.

Pulling just a few hundred students out of the rental market in Cambridge (where the Massachusetts Institute of Technology is located) cascades down across many neighborhoods. Suddenly, there are a lot of empty apartments in the area, and renters from other places move in, increasing inventory in their old neighborhoods.

Foreclosure rates are a wild card as well. If foreclosures unleash so much supply on a local market that home prices plummet, that opens up affordable purchases for many renters. Cities enduring slumping economies, job losses and high foreclosure rates can also have very low barriers to home ownership.

In some Cleveland neighborhoods hit hard by foreclosures and an economic slump, there are homes for sale with terms of a mere $500 down payment and $350 a month. These are owner-financed, so there's not even any grueling loan-approval process. Buying a modest home there can be cheaper than renting.

As for 2008, Johnson predicts more of the same; the strong rental markets will stay strong and the weak ones weak.

"Foreclosures have not worked their way through the system yet," he said. Overall, that will mean both additional supply on the market but more renters as well, leading to a flat national market.

Why the Countrywide deal will makes sense

December home prices plunge in So Cal

Mortgage applications up 28%
Find mortgage rates in your area.

Index of homebuilder sentiment stuck at record low for third-straight month

Associated Press - December 17, 2007 2:03 PM ET

WASHINGTON (AP) - Still a lot of doom and gloom among the nation's homebuilders.

The National Association of Home Builders says its housing market index was at a record low for the third straight month. The index gauges builders' perceptions of conditions and expectations for home sales over the next six months. The December reading of 19 was the lowest since the index began in January 1985.

Index readings higher than 50 indicate positive sentiment. The index has been below 50 since May of last year, has declined for eight straight months this year and has been unchanged since October.

Construction of new homes falls 24.8% in 2007, the largest amount in 27 years

Associated Press - January 17, 2008 9:13 AM ET

WASHINGTON (AP) - Construction of new homes fell in 2007 by the largest amount in 27 years.

The Commerce Department says construction began on 1.353 million new homes and apartments last year, down 24.8% from 2006.

It was the second-biggest annual decline on record. The biggest was a 26% plunge in 1980, when the Federal Reserve was pushing interest rates to post-World War II records in an effort to combat inflation.

Many economists believe that the current slump in housing will rival the dive in the late 1970s and early 1980s when housing construction fell for four straight years. It finally began to recover after the severe 1981-82 recession.

For December, construction fell by a bigger-than-expected 14.2%.

Mortgage Rates - Metrocities Mortgage January 11, 2008

Rates have fallen and are looking very good today.



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Loan Program
Loan Amount
Interest Rate



30 Year Fixed
$417,000
5.750%



15 Year Fixed
$417,000
5.250%



7/1 ARM
$417,000
5.750%



5/1 ARM
$417,000
5.750%



3/1 ARM
$417,000
5.750%



6-Month Interest-Only ARM
$417,000
5.875%



1-Month Interest-Only ARM
$650,000
7.125%



30 Year Fixed
$650,000
6.875%






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35621 Wolf Neck Road, Rehoboth Beach, DE 19971

Address:
REHOBOTH BEACH, DE 19971

MLS ID# 555871


$179,000
3 Bed, 2 Bath
980 Sq. Ft.

Single Family Property, County: SUSSEX, Year Built: 1989, Waterfront property, Central air conditioning, Laundry room
To access this page directly, use http://www.realtor.com/realestate/rehoboth+beach-de-19971-1093978308/
Property Features
Single Family Property
Status: Active
County: SUSSEX
Year Built: 1989
3 total bedroom(s)
2 total bath(s)
2 total full bath(s)
Approximately 980 sq. ft.
Style: Ranch
Laundry room
Central air conditioning
Interior features: Carpet, Clothes dryer, Clothes washer, Dishwasher, Disposal, Laundry rm/area, Microwave, Range and oven, Tile flrs, Vinyl flrs
Exterior features: Clear lot, Deck, Partially fenced, Porch, Public sewer srvc, Storage/out-building(s), Waterfront property
Waterfront property
Approximate lot is 50X150
School District: Cape Henlopen


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111 S Washington Avenue, Abbott Park, Lewes, DE 19958

Address:
LEWES, DE 19958

MLS ID# 550185


$160,000
2 Bed, 1 Bath

Manufactured or Mobile Home Property, Subdivision: LEWES TRAILER PARK, County: SUSSEX, Year Built: 1970, Waterfront property
To access this page directly, use http://www.realtor.com/realestate/lewes-de-19958-1083664866/
Property Features
Manufactured or Mobile Home Property
Status: Active
County: SUSSEX
Subdivision: LEWES TRAILER PARK
Year Built: 1970
2 total bedroom(s)
1 total bath(s)
1 total full bath(s)
Interior features: Carpet, Clothes dryer, Range and oven, Refrigerator, Vinyl flrs, Wall/window air cond.
Exterior features: Clear lot, Deck, Partially fenced, Patio, Porch, Public sewer srvc, Storage/out-building(s), Waterfront property
Waterfront property
Corner lot
School District: Cape Henlopen


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This information has been secured from sources we believe to be reliable, but we make no representations or warranties, expressed or implied, as to the accuracy of the information. You must verify the information and bear all risk for inaccuracies.

Presented By

! Atsidis Donna

I Sell Rehoboth Beach
Home Office: (302) 644-0117
Mobile: (302) 542-1787
Office: (302) 644-7965

Brokered By

BEACH TO BAY REAL ESTATE CENTER

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29088 Villas of Beach Cove, Bethany Beach, DE 19930

Address:
NORTH BETHANY, DE 19930

MLS ID# 555222


$779,900
4 Bed, 3.5 Bath
2,200 Sq. Ft.

Condo/Townhome/Coop Property, Subdivision: VILLAS OF BEACH COVE, County: SUSSEX, Year Built: 2004, Waterfront property, Garage, Dining room, Den, Laundry room
To access this page directly, use http://www.realtor.com/realestate/north+bethany-de-19930-1092948425/
Property Features
Condo/Townhome/Coop Property
Status: Active
County: SUSSEX
Subdivision: VILLAS OF BEACH COVE
Year Built: 2004
4 total bedroom(s)
3.5 total bath(s)
3 total full bath(s)
1 total half bath(s)
Approximately 2200 sq. ft.
Style: Townhouse style
Master bedroom
Living room
Dining room
Family room
Den
Laundry room
Master bedroom is 12x11
Living room is 21x11
Dining room is 13x12
Family room is 13x11
Garage
Interior features: Cable TV avail., Carpet, Clothes dryer, Clothes washer, Dishwasher, Disposal, Kitchen isle, Laundry rm/area, Microwave, Range and oven, Security feats, Tile flrs, Wood flrs
Exterior features: Deck, Patio, Public sewer srvc, Waterfront property
Waterfront property
School District: Indian River


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