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  Housing Problem Solvers Company


1201 West Peachtree Street, Ste. 2300,

 Atlanta, GA,30309

Housing Problem Solvers


How Long Will Bankruptcy Affect Your Foreclosure?

Posted on June 4, 2019 at 11:12 PM Comments comments (1075)
It is no secret that filing bankruptcy is a tool in a borrower’s arsenal that they will not hesitate to use to temporarily drag out or halt a foreclosure sale. A bankruptcy case has become an inevitable headache that nonconventional lenders will face between filing a Notice of Default and recording the Trustee’s Deed Upon Sale.

While borrowers have a range of bankruptcy chapters to choose from, this year has seen an unprecedented increase in Chapter 11 filings, which require a more complex set of procedures for borrowers and creditors alike. As a result, secured lenders have dealt with a longer and more expensive time period before they are paid in full.So how long can a secured lender expect a bankruptcy case to delay their foreclosure sale? While the specific timeframe for each individual borrower varies from case to case, we generally see the following types of cases:The Incomplete Filing. Debtors are required to file several documents with their initial bankruptcy petition. Often times, Debtors do not comply with this requirement because they file the bankruptcy case at the last minute with the sole goal of postponing the foreclosure sale. If a Debtor fails to file all of the necessary documents with the court, they then have two weeks from the date of the bankruptcy filing or the court will automatically dismiss the case. This is the best-case scenario for most lenders as it provides the fastest and most cost-effective way for the bankruptcy case to be dismissed to allow the foreclosure sale to move forward. A surprisingly large number of cases are dismissed this way and lenders can foreclose within three weeks of the bankruptcy petition being filed.The Immediate Motion for Relief from Stay. In some cases, circumstances exist at the time the bankruptcy was filed that allow the lender to immediately prepare and file a motion for relief from stay. These circumstances include multiple prior bankruptcy cases affecting the property, complete lack of equity in the real property collateral, and other bad faith acts by the debtor. Depending on the judge’s schedule and local rules, the motion for relief from stay can be filed and heard as quickly as two weeks after the bankruptcy filing. Often times, lenders can receive relief from stay to proceed with the foreclosure within one to two months of the bankruptcy filing.The Wait and See. When circumstances to obtain relief from stay do not exist at the time of bankruptcy filing, lenders must wait for the debtor to miss monthly payments on the loan or to sell the property and pay them in full. Most judges require at least two, if not three, missed payments before they consider taking action to grant relief from stay or they may order the debtor to make adequate protection payments to the lender in lieu of allowing the lender to foreclose. If a secured creditor finds themselves in this situation, they can expect approximately four to eight months before receiving relief from stay to foreclose or be paid in full by the sale of the collateral.The Lengthy, But Ultimately Ineffective Case. When the debtor is continuing to make monthly payments to a lender through the bankruptcy case and/or there is plenty of equity in the property, most judges will not grant a lender relief from stay. For example, in a Chapter 13 case, a debtor is allowed to repay all pre-petition debt over the course of five years. Unsurprisingly, many debtors fall behind on payments to the Chapter 13 Trustee and/or to the lenders after the first year or so. If a debtor fails to make plan payments or lacks income to continue making the payments, the Trustee often will file a motion to dismiss the case. Many debtors slip up after the first year or two, which results in the case being dismissed.The Long-haul. In extremely rare cases, the debtor will be able to drag out a bankruptcy case for three or more years. As stated above, a debtor in a Chapter 13 case who is consistently making its monthly payments to secured creditors and the Trustee can repay its debt over the course of five years and then receive a discharge at the end of the case. While this delay can last up to five years, the lender will be receiving payments during this time and should not need to proceed with the foreclosure as such.As always, there will be cases that do not fit into these categories, or the case could change from one category to another depending on various factors. A good attorney can work with you to create a strategy specifically suited to your borrower to ensure you’re paid in full in the fastest and least expensive way possible. If you have questions about the best strategy for your borrower and to ensure you are paid in full on your loan, contact the Geraci Law Firm to work out a strategy now.

Seventh Circuit Sends a Warning to Serial Bankruptcy Filers

Posted on October 30, 2018 at 10:16 AM Comments comments (5271)
Often, the homeowner would file a bankruptcy to stay the foreclosure, and then go through the process again and again in an attempt to delay the foreclosure as long as possible. These actions tied up the federal bankruptcy courts and negatively affected creditors who may have been caught up in the bankruptcy. 
A 20-year study performed by the American Bankruptcy Institute investigated bankruptcy filings in Utah, finding that 10.7 percent of debtors studied had filed multiple Chapter 7 bankruptcies and 20.3 percent of those serial filers had their case dismissed by the court rather than receiving a discharge.  
With over 800,000 bankruptcy filings in 2017 alone, serial filings are causing a severe court backlog and creating a massive problem for attorneys and creditors alike. 
Now it appears the courts are beginning to take action to try to stem the tide of serial debtors who file multiple petitions for bankruptcy protection. Recently, the U.S. Court of Appeals for the Seventh Circuit issued an opinion that serves as both a warning to serial filers and a potential remedy for lenders. 
In United States v. Williams, the debtor fell behind on her payments to creditors, including her condominium association. She filed the first of five Chapter 13 bankruptcies in 2003, failing each time to comply with the Chapter 13 Plan. The failure to make her payments ultimately resulted in each of the bankruptcy cases getting dismissed without a discharge. 
Following the dismissal of each case, the condo association would reinstate collections against the debtor causing her to file another bankruptcy. Between her second and third filing, the debtor also transferred title of her condo to a friend in an attempt to thwart the condominium association’s attempt to evict her. 
No consideration was given for the transfer, and to make matters worse, the friend took out two mortgages against the property during the short time she held title. The title was eventually transferred back to the debtor, where she then filed another Chapter 13 bankruptcy. 
After the debtor’s fifth bankruptcy filing was dismissed, the condominium association continued to attempt to evict her from the property. She again tried to stop the eviction by transferring title to her friend, who then filed her own Chapter 13 bankruptcy petition. 
Immediately following the bankruptcy filing, the friend transferred title back to the debtor, and subsequently had her bankruptcy case dismissed for failure to comply with her Chapter 13 Plan and providing false testimony about the property. 
The debtor and her friend were eventually charged in district court with bankruptcy fraud in a five-count indictment. The debtor was found guilty on all counts and sentenced to 46 months in prison. In determining guilt, the court calculated the total loss to creditors from the time of the first bankruptcy until the final bankruptcy filing, with an enhancement for defrauding 10 or more creditors. The friend cooperated with authorities and ended up taking a plea deal. 
The debtor appealed the district court’s decision to the Seventh Circuit, arguing that the court erred in their calculation of the debts and that there was no evidence that the debts increased due to any specific unlawful activity. 
The Seventh Circuit disagreed, holding that the debtor’s multiple filings represented bad faith filings that “fraudulently invoked” an automatic stay on her creditors in an attempt to prevent them from collecting on the debts.  
The debtor also argued that the court erred in calculating the number of defrauded creditors, stating that the government failed to prove any other creditor, besides the condominium association,  that had suffered harm. However, the Seventh Circuit found that with each bankruptcy filing, all creditors listed in the bankruptcy schedules were affected by the automatic stay. 
The Seventh Circuit’s ruling is important because it emphasizes the seriousness that accompanies a bankruptcy petition. It also demonstrates that serial filers will be dealt with severely, and in some instances, may see jail time for their actions.  
The decision also provides a remedy for creditors who must contend with debtors filing serial bankruptcy petitions in an attempt to delay and dissuade debt collection. The opinion offers creditors precedent to seek a denial of a debtor’s discharge, even when their specific debt was not the primary reason for the bankruptcy filing. 
If your borrower has filed several bankruptcies, or you have questions about a creditor’s rights in bankruptcy, contact the Geraci Law Firm.  

Declining foreclosures point to normal market

Posted on October 21, 2016 at 8:25 AM Comments comments (998)

Declining foreclosures point to normal market

Home foreclosures continued to decline in the third quarter to levels not seen for more than a decade. That’s nothing new. Over the past two years, numerous studies have pointed to a declining number of distressed properties. 

What is new is that the time to complete a foreclosure is now also going down, Attom Data Solutions says. That’s an indicator that states have pushed their backlogs of distressed properties through the foreclosure pipeline. It also is a sign that the housing market is returning to normal, said Daren Blomquist, senior vice president with Attom Data Solutions. 

“We’ve known for a long time that we are heading back to normal in terms of the activity numbers,” Blomquist told Scotsman Guide News.      

“There are two things that changed. We saw the monthly activity of foreclosure filings finally return to precrisis levels below 85,000 properties a month,” Blomquist said. “The second big thing is that we saw the average time to foreclosure decrease for the first time since we have been tracking this.”  
Blomquist said quicker foreclosure timelines indicate that banks have worked through the bulk of the Recession-era foreclosure backlog in most states, and most foreclosures completed now are more recent defaults.

On a national basis, it took an average of 625 days in the third quarter to complete a foreclosure, down five days for the same quarter a year ago. Attom Data Solutions (the former RealtyTrac) began tracking foreclosure timelines in the first quarter of 2007. The average time to complete a foreclosure has never before dropped in a quarter on a year-over-year basis since the company began tracking the data.  

The average time to complete a foreclosure also fell in 19 states, and was down significantly in a few hard-hit states that had a high number of distressed properties, including Nevada, Massachusetts and Michigan, Attom Data Solutions said. Foreclosure filings totaled 293,190 U.S. properties in the third quarter, down to a level last seen in 2005. 

Blomquist saw no immediate threats that would cause another downturn the housing market, but cautioned that pockets of the country have not recovered. 

“It is important to say that this is a national return to normal,” Blomquist said. “There are definitely still some trouble spots across the country that have not worked their way through the crisis.”
A more stable market

In an interview this month, title company First American’s chief economist, Mark Fleming, said the housing market was largely stable, with fewer foreclosures and rising equity levels. He wouldn’t call the market normal yet, however.

“We are still working off some of the hangover,” Fleming said. “Clearly, it has been trending for a few years now in the right direction, approximating back toward normal.” 

Fleming said the extremely low interest rate environment of the last few years has not been normal. Low rates have encouraged people to borrow money and purchase homes, driving up home prices. Fleming says that homes are still affordable in real terms, but eventually interest rates will tick back up, which could slow down the market.  

“The nominal house gains are, in large part, leverage driven,” Fleming said. “The challenge of calling a housing market healthy is that we are actually switching over from a long run, historical tailwind caused by low rates [that brought] benefits to the housing market.

“In our modern housing era and our collection of data, we have not  experienced that kind of a tailwind,” Fleming added. 

CoreLogic Chief Economist Frank Nothaft said foreclosures have ticked up in some oil-patch areas that have suffered job losses from the drop in energy prices. He mentioned North Dakota and also the cities of Odessa and Midland, Texas. Nationwide, there were 37,000 completed foreclosures in August, down 42 percent from the same month a year earlier, CoreLogic reported.  

"We are not quite back yet," Nothaft recently told Scotsman Guide News. "The foreclosure rate [and] the serious delinquency rate are back to the levels they were in 2007. It is good that we have come down from the really elevated default rates that we have seen for much of the last nine years, but they are still elevated compared to the history."

How to Spot the Top Problems Home Sellers Try to Hide

Posted on April 9, 2016 at 7:19 AM Comments comments (741)
Whether you’re a seasoned house hunter or a first-time buyer, the process of purchasing a home has plenty of pitfalls. And while you may assume that sellers are being upfront, it’s not uncommon for them to gloss over some of their home’s shortcomings.
“All homeowners sign a disclosure document about their property so buyers know what they’re getting into; however, it can be very tempting for some to tell white lies or conveniently forget facts,” says Wendy Flynn, owner of Wendy Flynn Realty in College Station, TX. “In fact, a very large number of real estate lawsuits stem from owners misrepresenting their property.”
So, just to be on the safe side, here are some common cover-ups and how you can crack them.
Water damage
Water stains aren’t just ugly; they’re also signs of leaks, and a breeding ground for mold. And they’re fairly easy for homeowners to hide with strategic decoration or staging, according to Frank Baldassarre, owner of Ace Home Inspections on Staten Island, NY.
“Many sellers try to conceal water intrusion in the basement, for example, with a pile of cardboard boxes or suitcases,” he says. You could always ask the homeowner to move the furniture a few inches and shine a pocket flashlight around. If the home has obvious red flags (an odd odor or visible wall cracks), it’s not unreasonable to request removing a large picture frame to take a peek at what’s behind it.
Another popular tactic for concealing water damage: a coat of fresh paint.
“Always ask the homeowner when they last painted,” says Baldassarre. “If it was a year ago, they’re probably not trying to hide water stains.”
A contaminated backyard
If you’re looking at an older home—specifically, if it was built before 1975—odds are it used to run on oil. Back then, homeowners typically had large oil tanks installed in the basement or underground in the backyard to conserve space and maintain the home’s aesthetic.
Please, Mr. PostmanSend me news, tips, and promos from® and Move. 
“The problem is that oil can contaminate soil, and because it’s incredibly costly to remove, some people try to hide evidence of the tank,” says Baldassarre. “Recently, I arrived to a home inspection early and caught the homeowner sawing off the top of the fill pipe.”
So while walking through a home’s backyard, look for a small fill pipe sticking up from the ground (sometimes covered by patches of grass), a dead giveaway that an oil tank is on the premises. Or double-check by asking the seller if the home was heated with oil in the past.
A shaky foundation
If the paint job in a home looks a little uneven around the door frames or windows, take a closer to look to see if it’s concealing any jagged cracks in the wall, advises Flynn. Those zigzags can signify foundation problems, a costly and potentially dangerous situation for potential buyers.
A weak foundation can prevent cabinets and doors from closing, cause supporting beams to snap from stress, or even result in a poor home appraisal, which can affect your loan and the home’s resale value.
Another clue that the house has a weak foundation: “if you feel as though you’re suddenly walking up or down—even slightly—as you move through the home,” says Flynn.
Problem neighbors
Barking dogs, rocker teens, and blaring horns are all factors that can turn off potential buyers. That’s why some owners try to downplay these situations with well-timed open houses and neighborly negotiations.
“Homeowners have an obligation to disclose what are called ‘neighborhood nuisances,’ but if they don’t, buyers have to rely on their word,” says Carrie Benuska, a Realtor® at John Aaroe Group in Pasadena, CA. “I know people who have asked their neighbors to keep noisy dogs inside during showings or only open their homes during strategic times of the day.”
Even well-intentioned owners may not be candid if they’ve become accustomed to their environment. One workaround, suggests Benuska, is for buyers to take a stroll around the neighborhood at different times of the day to get a more authentic feel for the area. And don’t hesitate to make small talk with the locals, who can offer a more objective view of their surroundings.
Weird temperature changes
Anyone who’s lived in a home with a freezing bathroom or unusually warm bedroom knows that a temperature imbalance can result in avoiding a room altogether. That’s why tapping into your senses is key when viewing your potential new home.
“If you walk into a room and there’s a subtle shift in the atmosphere—maybe the air feels dry or damp—ask the owner what the room feels like throughout the seasons,” says Benuska. “The culprit is usually poor insulation, sometimes as a result of the owner adding a second room or floor to the home.” Oftentimes, an owner isn’t trying to outright conceal extension work. However, if the construction was done without a permit—“more common than you’d imagine,” says Benuska—you aren’t required to pay for the extra square footage.

3 Steps for Calming Your Clients' Fears

Posted on April 9, 2016 at 7:14 AM Comments comments (1129)
Buying, selling, or making renovations to a home is about as emotionally stressful as illness, death, car repairs, marriage, or birth, according to a Texas A&M University study that ranks "high-emotion events" in a person's life.
To help reduce your clients' anxiety, BUILDER recently highlighted the following tips to increase their comfort:
  1. Assume your client is anxious about the transaction. Even if they appear calm about the buying or selling process, operate as though they're not. People who have bought or sold before likely still have some concerns that first-timers have. "Your team must act as if each buyer is anxious about their purchase experience," BUILDER notes. Raise potential concerns with your clients, listen carefully to their responses, and address each one to put them more at ease.
  2. Identify the most likely "emotional triggers" in the process. Review home buyer surveys you've conducted, and pay attention to the points in the transaction your clients rated the lowest. This will tell you where you need to set more realistic expectations with buyers—or lower them so no one feels surprised.
  3. Plan ahead and be proactive. Introduce your clients to key staff members immediately. For example, some builders are creating biographical fliers that include photos of their staff and provide information about what buyers can expect in the buying process. Sales associates who sell new homes often take four or five photos during construction and e-mail them to the buyer to keep communication open. Provide status updates to your clients once every two weeks, if not more. Keep them from feeling overwhelmed by offering contractors who can respond to their questions, or sending thoughtful gifts like a dog tag with their dog's name and new address on it. It show you've got their back.

How to Buy When You're in Debt

Posted on April 9, 2016 at 7:10 AM Comments comments (1163)
With mortgage rates remaining near historic lows, many financial experts are making the case that student-loan debt doesn't have to hold back millennials from buying a home. But the message isn't getting across: Nearly 70 percent of millennials say they are delaying a real estate purchase because of their student debt load, according to a new survey by CommonBond. recently highlighted whether a person with student-loan debt was ready to become a home owner with the following assessment:
  • Debt-to-income ratio isn't everything. Yes, the proportion of your income that goes toward paying your debt is a central determinant of whether you're ready to buy a home. Most lenders require a debt-to-income ratio of 36 percent or less to qualify for a mortgage. But a buyer with student-loan debt shouldn't worry that their number will automatically disqualify them. The key is that they pay their bills on time and still have enough income left over to compensate for their debt.
  • You can still handle more debt. The best interest rates tend to go to those who can offer a 20 percent down payment, but loans are available that require as little as 3 percent down on a home. How much more debt can you take on? If you can handle your student-loan debt and a bit of a higher mortgage balance and still be comfortable, that's one way to make it work. Or, if you can save up enough for a larger down payment while paying down student debt, that might be a better option. But potential home buyers need to take into account all the extra costs of home ownership beyond just the monthly mortgage payment. Check out: Help Buyers Add Up Extra Costs of Ownership
  • Make a budget. To save for the down payment, would-be buyers need a budget in place. Katie Brewer, a certified financial planner in Dallas, suggests budgeting with broad buckets: fixed expenses, variable expenses, and longer-term goals (e.g. paying down debt, buying a home, or saving for retirement). Brewer recommends keeping fixed expenses to 50 percent or less of your overall budget. There's no one budget style that is more effective, however. The important part is to just pick a method and then start working toward the goal — saving for a down payment, in this case.

Passage of Tax Extenders Package

Posted on December 30, 2015 at 9:25 AM Comments comments (1357)

WASHINGTON (December 18, 2015) – A significant piece of tax legislation is now on its way to the President’s desk, and the bill includes the extension of a number of expired tax provisions important to supporting homeowners and real estate investment.Tom Salomone, National Association of Realtors® president and broker-owner of Real Estate II Inc. in Coral Springs, Florida, praised Congressional leaders today after the House and Senate passed a tax extenders package that includes many provisions supported by NAR.“These tax extenders offer critical support for consumers, homeowners, commercial property investors and small businesses alike,” said Salomone. “A strong economy requires certainty, and this proposal gives a healthy dose of it to millions of American taxpayers.”Salomone highlighted the decision to extend tax relief for mortgage debt forgiveness as a win for Realtors®. This provision protects underwater homeowners from incurring a large tax bill on phantom income in connection with a workout or a short-sale. Since 2007, this tax relief has strengthened individual communities and the broader economy as more distressed homeowners were offered the flexibility to responsibly address an underwater mortgage. The tax extenders deal offers an additional two years of protection covering tax years 2015 and 2016.The bill also includes a permanent extension of a 15-year cost recovery period for the depreciation of qualified leasehold improvements. This provision ensures that a commonsense cost-recovery period remains permanently in place for improvements made to nonresidential commercial property.Real-estate related provisions also include the renewal of certain incentives to promote energy efficient commercial and multifamily buildings. Similarly, an expired tax credit of between $1,000 and $2,000 for energy-efficient new homes is extended for an additional two years under the bill.The legislation also permanently extends rules allowing small–and mid–sized businesses to immediately expense business equipment, rather than depreciate the equipment over several years.  This is important to Realtors®, who purchase new computers, copiers, cameras and even vehicles in the course of doing business.Finally, the tax bill also includes changes to the Foreign Investment in Real Property Tax Act (FIRPTA) that will ease restrictions on investment in commercial real estate.NAR sent a letter to House and Senate tax-writing committees as the final package was being developed to ask for support on maintaining these key provisions. Salomone thanked members on the committee for their leadership and attention to Realtor® concerns.“We’re grateful for the leadership shown on this important piece of legislation and look forward to continuing our work in support of homeownership,” said Salomone.The bill is expected to be signed quickly into law by the President.The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

Foreclosures Down 68% From Peak

Posted on September 10, 2015 at 5:39 PM Comments comments (799)
Foreclosures are falling fast. Since reaching a peak in September 2010, the number of foreclosures has plunged 68 percent – from 117,225 nationwide to 38,000 as of July, according to CoreLogic's July 2015 National Foreclosure Report, released this week.
In the past year alone, foreclosure inventory has fallen by nearly 28 percent and completed foreclosures have dropped about 24 percent. Completed foreclosures are the total number of homes actually lost to foreclosure.
Since the financial crisis began in 2008, about 5.8 million completed foreclosures have occurred across the country.
But the number has slowed significantly. As of July, the national foreclosure inventory is about 1.2 percent of all homes with a mortgage – the lowest since December 2007.
The number of mortgages in serious delinquency – 90 days or more past due – is also falling, dropping by 23 percent year-over-year. About 3.4 percent of total mortgages were considered in serious delinquency as of July – also the lowest rate since December 2007.

"Job market gains and home-price appreciation helped to push serious delinquency and foreclosure rates lower," says Frank Nothaft, CoreLogic's chief economist.
Five states alone accounted for nearly half of all completed foreclosures nationwide, according to CoreLogic. Those five states with the highest number of completed foreclosures for the 12 months ending in July were: Florida (98,000), Michigan (47,000), Texas (33,000), California (27,000) and Georgia (27,000).
Meanwhile, the five areas with the highest foreclosure inventory (as percentage of all homes with a mortgage) were: New Jersey (4.8 percent), New York (3.7 percent), Florida (2.7 percent), Hawaii (2.5 percent) and the District of Columbia (2.4 percent).

Apartment Rents Grow Faster than Incomes

Posted on September 8, 2015 at 1:54 PM Comments comments (2094)
The average employee isn’t getting a big raise this year—but apartment rents are growing more quickly than ever.
“Across most markets, renters are paying a higher percentage of their incomes in rent,” says Luis Mejia, director of U.S. multifamily research with the portfolio strategy division of research firm CoStar.
That’s not stopping apartment rents from going up. That’s partly because the average income is surprisingly high for households living in rental housing with unrestricted rents. These households can, on average, afford to pay and they don’t have that many attractive alternatives. For now, for-sale housing is not a lure for these renters, who may not have gathered the necessary funds for a down payment, according to experts. Eventually, however, they may look for cheaper housing in other neighborhoods, bidding up the prices for market-rate apartments in new areas and gentrifying new neighborhoods.“Eventually, budget-constrained renters will look for more affordable options in neighborhoods that haven’t been exposed to significant demand, or are more distant from the central districts but still accessible to employment centers,” says Mejia.
Market-rate renters have (relatively) high incomes
Most of the renters who live in “market-rate” apartments, in which the rents are not restricted by affordability programs, have enough income to pay for current rent increases, at least for now, according to researchers. “The average annual household income for residents of market-rate apartments is around $85,000, well above typical household income for the U.S. populace as a whole,” according to Greg Willett, chief economist with RealPage, Inc., a company that provides property management software for the multifamily industry. Willett’s data is based on the 10 million apartments that use RealPage’s software.
“We think that info pulled from market-rate apartment users of RealPage products lines up pretty well with the characteristics of the market-rate stock that exists in the U.S. as a whole,” says Willett. For example, the proportion of class-B and class-C stock is about the same in Real Page’s large sample as in the U.S. overall.
The average income of $85,000 that RealPage reports is not as high as it might sound at first, since many of the households may have two or more people earning incomes. However, it’s enough to pay the average of $1,200 that these households pay in monthly rent, which works out to just 17 percent of their average income, says Willett. Apartment market research firm MPF has a few caveats: rents are higher compared to incomes in West Coast markets and for younger people.

“But that’s been true for young adults in every generation historically,” says Willett. “The big-picture story is that affordability isn’t especially challenging for most market-rate apartment renters.”

Most of these renters seem willing to accept rising rents. The average lease renewal rates are now relatively high compared to years past, according to researchers including MPF. “Rents will continue to grow faster than wages and inflation,” says Douglas Robinson, spokesperson for NeighborWorks, an organization that supports affordable housing. “Bottom line is people need to live somewhere, so they will pay the higher rent and make it work in terms of budget.”
Where are low-income people living?
MPF’s data may show that the nation’s problem with unaffordable housing is worse than many thought. About 30 percent of U.S. households earn $30,000 or less a year (once again, that’s household income, not individual income). That’s not enough money to afford the rent on an average market-rate apartment almost anywhere across the country.
“A significant chunk of the very low-income households likely live in rental single-family home product,” says Willett. Roughly half of the nation’s rental housing is located in single-family homes.
This may present extra challenges for low-income people, since these single-family homes may be more likely than apartments to be located far from jobs or infrastructure like light rail stations and bus stops. In the past, when many low-income people were crowded into inner-city neighborhoods, they were more likely to be near employment opportunities, mass transit options and social services.
“Transit costs can surprise a person who lives in the suburbs and commutes into a job center,” says Robinson.
Demand is also high for government-subsidized “affordable” apartments with restricted rents, though the number of these apartments is much smaller than the number of low-income families, according to numerous experts.
Apartment rents rise higher and higher
Rents for market-rate apartments are expected to keep growing quickly. “Reis is expecting to see rent growth accelerate in 2015,” says Michael Steinberg, analyst for economics and research at research firm Reis, Inc.
Effective rents will likely increase by 3.8 percent in 2015, according to Reis. That’s roughly twice the rate of inflation. It’s also faster than the 3.5 percent rent growth in 2014 and 3.2 percent rent growth in 2013.
Rents will grow quickly, even though developers plan to finish hundreds of thousands of new apartments by the end of the year. These new apartments will cause the vacancy rate to increase slightly, to reach 4.6 percent by the end of the year. That’s the wrong direction for vacancies to go, but the vacancy rate is currently so low that a slight increase won’t change the dynamic by much.
“There is some concern about the direction of fundamentals, but we are coming from a very strong performance,” says Reis’ Steinberg. “Even with the amount of new supply, vacancy rates are still pretty low. 

Apartment Markets Survive New Construction, So Far

Posted on August 31, 2015 at 8:01 AM Comments comments (4702)
The cities where developers are opening the most new apartments are handling the new supply pretty well, at least for now.
“Looking at rent growth performances, there’s really only one spot [major metro apartment market] that is having trouble digesting new supply,” says Greg Willett, chief economist for RealPage Inc. “That’s Houston.”
But developers aren’t finished. Even as they race through an incredibly busy year for new construction, apartment developers are now planning even more new projects. They still often choose to start construction in the same cities and the same submarkets within those cities where they have been busy building since 2010. “We’re tending to continue to build most heavily in the same spots,” says Willett.
Banks seem very willing to finance these new developments. “You will have a number of lenders offering financing—no matter where,” says Michael Riccio, co-head of national production for CBRE Capital Markets. That includes nearly all property markets—with the possible exception of more troubled markets like Houston and Washington, D.C. “Houston might be the outlier.”
Strong markets absorb new apartments
So far, the news is good from many apartment markets where developers have built large numbers of new apartments relative to market’s inventory of existing apartments. The towns that have best handled a lot of new construction include Denver, Colo.; Seattle and Charlotte, N.C., according to MPF Research, a division of RealPage.
“Charlotte, in fact, may be the real surprise performer on this list. The metro is dealing with a lot of new supply stunningly well,” says Willett. Occupancy rates and rent growth in Charlotte remain notably stronger than the historical norm. “That performance speaks to the strength of Charlotte’s overall economy, the favorable characteristics of the metro’s renter base, and the general upward movement of this locale in terms of overall desirability as an apartment investment choice.”
Out of the top 10 metro markets where developers are building the most new apartments, relative to the existing industry, only Houston seems to have been seriously damaged.
In Houston, rents for class-A apartments only grew 1.8 percent over the last year, compared to 5.2 percent per year on average over that last three years. Another 32,000 apartments are still under construction, according to Willett. There’s a real possibility that average rents may fall at the top end of the market over the next 12 to 18 months. “Construction activity is only part of the story,” says Willett. Economic growth generally and job production specifically have fallen in Houston with the price of oil.

Developers continue to start in construction projects in same places where they have already built many new apartments. Charleston, S.C.; Nashville, Tenn.; Austin, Texas, and Charlotte top MPF’s list of the top 10 metro markets, even though they have already absorbed thousands of completed new apartments. Houston comes in eighth on MPF’s top 10 list, with many projects that started construction before the crash in the price of oil.

There are just two cities where apartment developers have deeply cut back on new construction after a building boom in recent years. There are still 20,651 new apartments under construction in the Washington, D.C., metro area, down steeply from the 30,095 apartments under construction in late 2013. In Raleigh/Durham, N.C., developers are now building 6,960 new apartments, a little more than half the 11,423 developers had under construction in late 2013.
Developers pile into downtowns
Developers also continue to start projects in same submarkets—often downtown. About a third of all new apartment construction is being built downtown, according to data from CoStar.
For each of the metro areas on MPF’s top 10 list for new construction, the apartment inventories are growing faster downtown than for the metro area as a whole. That’s creating huge changes for these downtown areas—many of which did not have many apartments before the last few years. The scale of this new construction downtown could create problems, since downtown apartments tend to be luxury high-rise projects that are expensive to build and that relatively few potential renters can afford. 
“We are starting to see vacancies tick up in downtowns across the country,” says Jay Parsons, director of analytics and forecasts for MPF Research at RealPage.
Developers are relying less on downtown as they plan future projects—though they are still disproportionately focused on downtown markets. “The urban core submarkets generally now account for less of total ongoing construction than they did two to three years ago,” say Willett. “That’s an encouraging shift.”