That’s what I’m hearing about Dallas Real Estate and working to confirm. Washington D.C., and I guess President Obama, are getting their wish. The U.S. is turning into a nation of renters.
Home leasing is up in Dallas by 13%. I WAS TOLD that 2000 of 6000 RE transactions in the first quarter were leases, or about one third, working to confirm with North Texas Real Estate Information Systems. If so, that’s huge for an affordable real estate market like Dallas. Betty Misko at Ebby Halliday says many buyers rent because have no choice: they transfer in to Dallas with homes languishing on the market in other cities, begging for buyers.
And Steve Brown is on this, too. He reports (sub required) that real estate agents are even reporting a shortage of quality lease homes. I am also told by agents there is an overall shortage of inventory — Lakewood’s Scott Carlson is asking for listings. This is gettng to be the story: one M streets-area home was on the home for about a year, which is twice as long as the normal 6 months. But as soon as the “for lease” sign went up out front, the agent says showings almost tripled.
“There is definitely a shortage of good, quality lease homes,” (real estate agent Darren) Dattalo said. “People that should be buying are leasing instead, but they still want something nice and in the location they would eventually buy in.”
While home sales in North Texas are down about 10 percent so far this year, prices off by 1%, the number of home rentals is up 13 percent, according to statistics from the Real Estate Center at Texas A&M University and NTREIS (North Texas Real Estate Information Systems).
There are only about 4,000 rentals listed with property agents — 10 percent fewer than a year ago, another sign of dwindling inventory.
It is hard to lease a home in Dallas, and getting harder. As one reader emailed recently, why is there not a central site for leases? (One is coming, stay tuned.) Brown says “it takes six weeks to rent a house in North Texas, compared with almost three months to find a buyer.”
I don’t know where he’s getting that three months figure — a healthy market takes six months to move a listing, and we are slightly above that benchmark in Dallas.
It’s true: more high-end properties are now accepting tenants over buyers, since buyers are few and far-between. Many have multiple offers and some are over asking price:
“We had three lease offers on one house in 48 hours,” said Player, who is with Virginia Cook Realtors. “In the past month, I’ve leased three high-end properties.
Experts blame the economy. There’s a lot of uncertainty, says Misko, and with uncertainty comes a lack of desire to commit. Besides, says she, many young people who would be buying first time homes now as they did in 2006 or 2007 don’t have jobs and may be living with their parents. Because of these changes, Misko says all Ebby agents are being trained to handle leases, a less profitable transaction for them than selling a home. Typically, a lease commission is equal to about one month of the rent, and split between the agents. So even a $9000 lease would net each agent $4500, far less than the 1.5% commission split on the sale of a $1,00,000 home. In California, for example, few real estate agents handle leases. In New York City, apartment leasing agents are considered the dregs of the real estate hierarchy.
Even more shocking: some renters are finding it more expensive to lease than it would cost in mortgage payments to buy a house. But here, too, they are stuck, so they do it.
“If their home has not sold in the city they just came from, they have nothing for a down payment,” says Misko. “And the down payment requirements in general are much larger.”
Stiffer down payment requirements and appraisals — the whole process is so much more cumbersome than it once was. Often getting into a lease home for a couple years is faster than buying.
Here’s the irony: the cost of buying a home in North Texas is at the lowest point in almost a decade, and mortgage rates are so cheap they are practically free. Trulia recently lauded Dallas as one of the cheapest U.S, cities for homes. It costs significantly less to buy a house here than to rent, says Trulia, which, duh, most of us have known for a long time. Remember the guy who bought a home in East Dallas for $12,500? In fact, Trulia found that buying is cheaper than leasing in almost three quarters of the largest U.S. cities. Renters always think that they are free from taxes and home maintenance when they lease, not realizing those costs are covered in their rent and if they increase, so will their monthly rental output. Few landlords are in the business of losing money.
In fact, in a recent Wall Street Journal report, a Sacremento real estate agent spent $500,000 buying four foreclosed homes in California that he has turned to rentals. Investors can cover their monthly costs and are making an average of 8% to 12% profit. I’ll take that over the stock market any day. This has also given rise to real estate investment advisory companies like Cash Cow Investments, which I need to write up one of these days.
Trulia’s Ken Shuman says that homeowners remain on the fence today about renting and buying. For many, there is no choice: home financing is difficult to obtain despite the lowest interest rates in history, larger down payments are demanded, and the nation is in a fog about the housing market. Will prices fall even more? Will the economy ever stabilize? I’ve said it before, I’ll say it again: Mark Dotzour at Texas A&M’s Real Estate Center needs to run for the Oval office, or at least advice the next pres. Here’s his recipe for getting the economy moving:
We are creating such a hostile environment for businesses that we could be in for a long period of economic stagnation in America. What would a business-friendly agenda look like? Well here it is.
Imagine if the President and Congress came out with a bi-partisan plan to:
- Repeal the health-care nightmare.
- Repeal Dodd-Frank, and come up with 15 pages of meaningful bank reforms.
- Tell China to stop manipulating their currency and buy something produced by Americans.
- Roll back EPA regulations to 1999 levels.
- Roll back all other business regulations to 1999 levels.
- Announce an airtight plan to reduce the deficit to zero in seven years.
- Lower corporate tax rates to stop companies from fleeing America.
- Foreclose on four million homes and sell them to private sector investors.
Dodd-Frank is only going to get worse as regulators come up with 400 new rules. Foreclosures are being held up by fearful banks who do not want to cut the umbilical cord. Those properties could be sold to create much-needed housing for our new renter nation.