HOUSING DOWNTURN IS A BOON FOR SOME RENTERS
‘Shadow’ market thrives as investors can’t sell off houses, condos
updated 6:33 p.m. ET, Wed., June. 4, 2008

NEW YORK – Renters may be the biggest winners in the current housing slump, especially in places like Florida, Las Vegas and Southern California, that have thousands of vacant for-sale and foreclosed homes and condos on the market.

Apartment vacancies are edging up in many areas of the country as frustrated sellers instead try to rent out their homes and condos in once red-hot housing markets. And that is making it harder for landlords to raise rents. In the toughest markets, apartment owners are even offering lease incentives to snag renters.

This “shadow market” of investor-owned homes and condos accounts for almost half of the rental stock, and attracts displaced homeowners more often than your typical apartment renter.

“What’s different now is the degree of excess homes and condos being put on the rental market. The sheer volume is creating more competition for traditional rental markets,” said Hessam Nadji, managing director at Marcus & Millichap Real Estate Investment Services, which analyzed the data for The Associated Press.

After staying relatively flat last year, apartment vacancies bumped up in the first quarter from the end of last year, the research showed. The vacancy rate is expected to rise by a half-percent this year to 6.1 percent as the market absorbs about 3.3 million more rental home and condo units.

Nadji also predicts rent growth nationwide will slow to 3.5 percent from 4.6 percent.

The national trend, however, belies what’s happening in the country’s most beleaguered housing markets. Areas that experienced explosive condo development and conversions of apartments into condos for sale are finding those units unloaded onto the rental market because developers can’t sell them.

Sharp increases in vacancy rates plague most Florida markets where condo development was rampant. In Jacksonville, for example, rental vacancies spiked to more than 10 percent in the first quarter, up from 5.8 percent in the prior year. Orlando and Ft. Lauderdale had the next biggest gains in vacancies.

“As the sale activity for condos and single-family homes declined over the last 24 months, investors decided to rent them instead of trying to sell them at reduced prices,” said Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors Inc. in Miami.

Since the beginning of the year, the number of rentals on the Miami and Ft. Lauderdale markets combined has risen more than 11 percent to 10,000 from 9,000.

“Our rental activity is about three times what it was three years ago,” Shuffield said. “Today, for the first time ever for the firm, we’re renting more properties than we’re selling.”

In San Diego, single-family homes being placed on the rental market are hurting luxury apartment communities, said Rick Snyder, president of the California Apartment Association.

The new supply is preventing some landlords from increasing rents, and other are even being forced to offer freebies like one free month with a one-year lease or upgraded unit fixtures.

“People realize they’re getting substantially more value than what they’re spending on that rental,” said Snyder, who is also president of apartment manager R.A. Snyder Properties Inc.

But there could be some unseen risks behind these bargain shadow rentals. Renters who got homes or condos on the cheap may find a sheriff knocking at the door with an eviction notice if their landlord fails to pay the mortgage.

“Some investors will take any dollar amount to have any cash flow,” Nadji said, noting that the rent often only covers a portion of the mortgage payment. “We’re seeing a lot of tenants being displaced when landlords get foreclosed upon.”

In Southeast Florida, renters have taken notice and have begun to avoid those properties, said Susan Whitney with property management company Riverstone Residential Group in Boca Raton, Fla.

The shadow market battered the rental market in the last two years, Whitney said, as renters opted for investor-owned homes and condos, which helped to drive down rents in the area. But as news spread of tenants getting burned by delinquent landlords, renters returned to the traditional market.

“(They) have become more weary about investor homes and condos, and now concessions in the market have started to decrease,” she said.

Meanwhile, renters in some of the costliest cities aren’t getting any relief, to their dismay. Rents in pricey San Francisco surged 11.5 percent last year, while New York rents shot up 9 percent and rents in San Jose, Calif., climbed 8.7 percent, Marcus & Millichap said.

Elizabeth Pulido, an administrations manager at a New York hedge fund, recently signed a lease on a 600-square-foot one-bedroom apartment in Manhattan for $2,800 a month. Pulido, who moved from the Bay Area in California earlier this year, originally had hoped to pay only $1,500 per month.

“I quickly found out that you can’t get anything decent in Manhattan for that. I think you can get a studio but it’s basically a box really,” the 31-year-old said. “If I go back to California, I could get double that for the same price and something nicer.”

But if job losses continue to mount, rents even in the most robust markets could shrink while vacancies rise, Nadji said.

“Employment has the closest correlation to rental absorption,” he said. “Demand for studios and one-bedrooms is weak, while we’re starting to see more demand for multi-bedroom, multi-bathroom units because people are doubling or tripling up to save money.”

“We’ve enjoyed being a part of this community for 44 years,” says Ron Shuffield, President of EWM.  “It’s always exciting to move to a brand new location.  The new construction facilitates our use and access to the newest technologies, while still preserving our desired centrally located South Dixie Highway location.”

EWM has 12 offices in Miami-Dade and Broward Counties.  355 Alhambra Circle in downtown Coral Gables is home to EWM’s mortgage, title and insurance affiliates, along with its corporate functions.

“Our organization is about generating the most positive work environment for our associates and staff,” continues Shuffield.  “We’re very proud of our team and their accomplishments, and look forward to many years of success at our newest location.”

EWM Realtors was founded in 1964 and has grown over the years to become one of Florida’s most dominant full-service residential real estate firms through select acquisitions and organic growth, offering a broad range of services through its affiliated companies; HomeServices Lending, LLC, EWM Title, and EWM Insurance.

In 2003, EWM merged with HomeServices of America, Berkshire Hathaway’s real estate affiliate, and became Berkshire’s entry into Florida’s real estate market. HomeServices of America is the nation’s second largest residential real estate brokerage firm.

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Monica Betancourt is a luxury home marketing specialist, is fluent in English, Spanish and Portuguese and is a member of the Realtor Association of Miami-Dade County. She is a native of Bogota, Colombia and has lived in Miami for more than 35 years. Betancourt earned a Bachelor of Arts degree in business administration from the University of South Florida and is a former Trustee of Palmer Trinity and St. Thomas Episcopal Parish schools.

Nicholas Gara and Monika Gara have joined EWM as a husband and wife team. Both are fluent in English and Spanish and are members of the Realtor Association of Miami-Dade County.

Mayra Guerra relocated to Miami seven years ago from Cuba. She has degrees in both library science and industrial design. Guerra is a member of the Realtor Association of Miami-Dade County.

Katalin Toth gained more than three years of real estate experience while living in Hungary, prior to moving to South Florida ten months ago. In her spare time, Toth enjoys astrology and Japanese culture. She is a member of the Realtor Association of Miami-Dade County.

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Cynthia Bendheim earned a Bachelor of Science degree from Florida State University and a Juris Doctorate from Nova Southeastern University School of Law. She is a member of the Realtors Association of Miami-Dade County.

Darin Haughie has resided in Florida for 34 years. Prior to joining EWM, he served for 20 years with the U. S. Coast Guard. Haughie earned a Bachelor of Science degree in business management from the University of California. He is a member of the Realtors Association of Miami-Dade County.

Astrith “Milena” Lopez relocated to South Florida from Colombia 14 years ago. She earned her degree in business administration and marketing from Miami-Dade College and will be attending Florida International University to further her studies in business administration. Lopez is a member of the Realtors Association of Miami-Dade County.

Madeline Martinez is a native of Newark, New Jersey, having moved to Florida 33 years ago. Prior to joining EWM, she worked at Bowman Foster Ashe Elementary School in Miami. Martinez earned a bachelor’s degree in elementary education from Nova University. She serves as vice president of the PTA at Vineland Elementary School and is a member of the Realtors Association of Miami-Dade County.

Roxana Martinez has been active in the real estate industry having worked as an administrative assistant at Codina Group, as well as working in the commercial real estate division at Barnett Bank. She relocated to Florida 40 years ago from Denver, Colorado. Martinez earned a bachelor’s degree in business administration from Florida International University, with a major in marketing and a minor in international business. She is a member of the Realtors Association of Miami-Dade County.

Natalia Perez-Abreu has been in the real estate industry for two years and is a member of the Realtors Association of Miami-Dade County. She is a native of Barranquilla, Colombia and has lived in Florida for 14 years. During her spare time, Perez-Abreu is involved with the Homeowners Association of the Isles at Bayshore.

Alexandra Restivo moved to Florida 17 years ago from New York City. She earned a Bachelor of Arts degree in English literature, Italian and psychology from University of Miami and is fluent in Italian. Restivo is a member of the Realtors Association of Miami-Dade County.

The site includes a breakdown of homes currently in foreclosure within key cities in the tri-county area.

While many sites offering information on foreclosed properties charge a fee, www.ewmforeclosures.com is free-of-charge, and offers a broad range of not only information about homes, but information about dozens of neighborhoods in South Florida, as well as access to buyer tools such as EWM’s proprietary Facts & Trends reports.

“Foreclosures are now approaching 5% of the combined Multiple Listing Service (MLS) for Miami-Dade and Broward Counties combined,” says Beth Butler, COO of EWM Realtors. “That means that at any given time, there are now hundreds of properties in foreclosure. Our new site provides clear, succinct information, all at no cost to the consumer.”

The site, which garnered more than 8,000 hits in its first month, provides reports that include city-by-city information and listings on foreclosed homes and condos.

“As Albert Einstein noted, ‘In the middle of every difficulty lies opportunity’. While a foreclosed property is often an extremely difficult situation for the previous owner, it is clearly an opportunity for another family or individual,” concludes Butler.

When Carmen and Donna Romeo began searching the Internet for an oceanfront home in Miami Beach, they soon located Scott Patterson, an experienced sales professional with Coral Gables-based Esslinger-Wooten-Maxwell (EWM) Realtors, one of the largest residential real estate firms in the U.S.

Patterson, a waterfront specialist and member of EWM’s Chairman’s Club, knew there was a limited inventory of almost-new oceanfront homes in Miami-Dade and Broward Counties. After previewing more than 20 properties, he showed the Romeos a five-bedroom, five-bath villa at the Bath Club, 5959 Collins Avenue, Miami Beach – a Peebles Atlantic development completed in 2005-06.

“Carmen Romeo, who is a director at SEI Investments Company, and Donna loved the lifestyle offered by the Bath Club, which has the only oceanfront villas available in Miami Beach,” he said.

On March 28, the Romeos purchased their new residence for $6.7 million, the highest price ever for the six four-story villas at the Bath Club, according to Patterson. Matthew McMillan, McMillan Realty Inc. represented the seller of the four-story residence, which has nearly 6,000 square feet of space.

Patterson said the Romeos, who are moving from Pennsylvania, have already hired noted interior designer Sharron Lewis for their new residence, which includes a private pool, as well as all the resort amenities of the adjacent Bath Club – a Miami landmark from the 1920s whose façade was preserved in the Peebles development.

“The Romeos now have the best of both worlds,” said Patterson. “They have the space and privacy of a single-family home, with all the conveniences of a resort, including its own five-star restaurant.”

Patterson has been an associate of EWM Realtors, Inc. since 1997, with more than $155 million in residential sales. He markets single-family estate homes, luxury condominiums and waterfront home sites from Miami to Palm Beach County. “Many affluent buyers come to Florida seeking a lifestyle of relaxation in a spacious residence with all the latest features,” said Patterson. “I am able to show buyers different types of communities and residences throughout South Florida.”

Carlos Dominguez has more than seven years of real estate experience in the commercial and residential sectors. Prior to joining EWM, Dominguez owned Business Resources & Enterprises, Inc., where he provided consulting services for business development. He earned a bachelor’s degree from Simon Bolivar University in Venezuela and a master’s degree in chemical engineering, from Virginia Polytechnic Institute & State University. He is a member of the Realtors Association of Greater Ft. Lauderdale.

Nora Dominguez has more than 22 years of real estate experience, with extensive knowledge of the residential market. She is a native of Caracas, Venezuela and has resided in South Florida for 15 years. Dominguez earned a Bachelor of Science degree in food science and technology from Virginia Polytechnic Institute & State University and a master’s degree in education and education administration from Simon Bolivar University in Venezuela. She is a member of the Realtors Association of Greater Ft. Lauderdale.

Dianne Eckert has been active in the residential real estate industry for 18 years, is a Certified Relocation Specialist and has earned the International Diamond Society award. She earned a master’s degree in business administration from Universidad Los Andes Santa Fe de Bogota and a post graduate degree from Alta Gerencia in Bogota, Colombia. Eckert is a member of the National Association of Realtors, Florida Association of Realtors and Realtors Association of Greater Ft. Lauderdale.

Ana Maria Isaza has more than eight years of real estate experience, earning the Diamond Society award in 2005. In addition, she holds the e-PRO designation and is a relocation specialist. Isaza attended EAFIT University in Medellin, Colombia, earning a degree as a systems engineer, and the University of London, where she earned a degree in management information systems. She is a native of Medellin, Colombia, and has lived in South Florida for eight years. Isaza is a member of the National Association of Realtors, Florida Association of Realtors and Realtors Association of Greater Ft. Lauderdale.

Irma Marquez has more than four years of real estate experience working in the residential, commercial and pre-construction sectors. She earned her degree in accounting from the Universidad Jorge Tadeo Lozano in Bogota, Colombia and holds the e-Pro designation in real estate. Marquez was born in Colombia and has resided in Florida for nine years. She is a member of the Realtors Association of Greater Ft. Lauderdale and Realtors Association of Greater Miami and the Beaches.

Mauricio Molano joined the real estate industry four years ago, earning his GRI designation. He is a native of Bogota, Colombia, and has resided in South Florida for eight years. Molano is a member of the Realtor’s Association of Greater Ft. Lauderdale and is an active volunteer with the American Youth Soccer Organization.

Arcuri is a native of Homer, Louisiana and has resided in Florida for 18 years. She earned a Bachelor of Science degree in interdisciplinary social science from Florida State University. During her spare time, Acuri volunteers with Big Sisters Big Brothers of Broward, as well as Broward County Schools. She is a member of the Greater Ft. Lauderdale Board of Realtors.

Jordan, originally from Jersey City, New Jersey, has resided in South Florida for nine years. She received a Bachelor of Science degree in criminal justice from New Jersey City University. Jordan is affiliated with The Florida Opera Society, Pinion, Inc., 1000+ and Women in Distress Auxiliary and is a member of the Greater Ft. Lauderdale Board of Realtors.

Newman has resided in South Florida for more than 27 years. Prior to joining EWM, he served as an operating partner for 10 years with a public relations and marketing firm. Newman is a member of the Realtor Association of Greater Ft. Lauderdale and serves on the board of a local non-profit organization.

Reid hails from Toledo, Ohio and has lived in South Florida since 1983. He attended the University of Toledo, where he earned a Bachelor of Science degree in biology, as well as a Master of Science degree in education and public administration. Prior to joining EWM, Reid worked at Deloitte & Touche LLP in Ft. Lauderdale. He is a member of the Realtor Association of Greater Ft. Lauderdale.

Sanders was born in Jamaica, New York and has lived in South Florida for 32 years. He attended Alfred University and earned a Bachelor of Arts degree in economics and business. Sanders was a Coral Springs City Commissioner for 14 years and the Vice Mayor for six years. He is the immediate President of the Red Cross Angels, is a Board Member of Broward Navy Days and is a member of the Greater Ft. Lauderdale Board of Realtors.

Silverman is a native of Baltimore and has resided in South Florida for 12 years. He has more than six years of real estate experience having earned the Greater Realtors Institute designation and is a member of Greater Ft. Lauderdale Board of Realtors.

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As defined by Wikipedia…Foreclosure is the legal process in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) after the owner has failed to comply with an agreement between the lender and borrower called a “mortgage” or “deed of trust”. Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage or lien”.

Where do I find foreclosed properties?

You can search for all pre-foreclosed and foreclosed properties that are listed in the MLS.

Is buying a foreclosure just like any other property?

The procedure for buying a foreclosure that is listed in the Multiple Listing Service is much the same as any other property. The seller is typically a bank or a third party company that the bank has designated to handle their foreclosures. But here are a few differences you may encounter:

• Most foreclosures will require that you close within 30 days.
• Most foreclosures are sold in as is condition. Property inspections are of particular importance in a foreclosure sale. Many times the previous owner has removed fixtures or left the property in some state of disrepair.
• Your offer may take some time to get a response. Since you are dealing with an absentee owner, your offer may take some time to be accepted or counter-offered and the response may be verbal. Some offers may require an approval from a higher source before it can be expected. The best way to proceed in making an offer is to make your contract as straightforward as possible.
• Some foreclosures may be done on special contract forms or require special addenda. Ask for samples of these forms when you see the property so that you will be prepared when you make your offer.
• Many foreclosures will ask for your financing information prior to accepting the offer.

What if the property is listed as “pre-foreclosure”?

When a property is listed as “pre-foreclosure” it means anything from a homeowner has missed a payment or two or the property already has a lis pendens which means a lawsuit on the property has been filed. Since the foreclosure is not complete, the process to purchase may be a little less defined and could take a bit more time to purchase.

What is a short sale?

When a property owner owes more on their mortgage than the property is worth, the listing may be deemed a short sale. In some short sale cases, the property owner may be current on the mortgage and just needs to sell. How the short fall is handled can vary depending on the financial circumstances of the property owner. It is certainly of the utmost importance to know how much is owed on a short sale and how the deficit will be handled. In cases where the mortgage holder may be willing to negotiate the deficit, be aware that there may be a significant time delay from the time you make an offer until you know you have a contract. In some cases this can be months instead of days. If you want to purchase a short sale, make sure you factor extra time into your equation.

Is financing available for foreclosed properties?

Yes, there is financing available for foreclosed properties. With the FHA limits increased in our area to $423,750, FHA loans are a great source to buy that foreclosure with a small down payment. If the property needs rehabilitation, FHA also has a loan that will allow you to finance the improvements needed to fix up the property. Conventional loans are also available as long as the property is in decent condition. It is always a good idea to speak to a mortgage loan officer before making an offer to see what options are available.

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