In the March issue of the Foreclosure News Report, we invited Gary Beasley, president and CEO of Waypoint Homes, to tell us how his company is investing in the foreclosure marketplace. Read about what real estate professionals are doing to stabilize the housing market. Here’s a short excerpt from Beasley’s article.
Plug any real estate-related term into a search engine and you're likely to find a binary debate: owning versus renting, fixed rate versus adjustable, and, most recently, investors versus individual buyers. While I can see the attraction of a simple story, to my mind this is an old-fashioned way of looking at a very new real estate market — one that's been utterly and completely transformed by the events of the past decade.
To continue to make progress on solving the foreclosure crisis, we need to focus on a multifaceted market, where a variety of alternatives can co-exist and work together to solve this (still) very large problem. Companies that own portfolios of single family homes have emerged to meet the growing need for high-quality rental housing and operate on the scale that the magnitude of the challenge demands. Let's start with the growing demand for rental housing. The nation's home ownership rate is currently 65.4 percent, according to NerdWallet, the lowest it has been in 16 years and more than four percentage points lower than its 2005 peak. Based on one analyst's view that each one percentage point drop in the homeownership rate creates a need for an additional 750,000 rental units, approximately 3 million more rental units are needed today compared to before the crash.
Add in the effects of tight credit, which means more people don't have the higher down payments and credit scores banks now require, the residual skepticism about the wisdom of homeownership generated by the bust, and the siren song of what venture capitalist Mary Meeker calls an “asset light” lifestyle and you're looking at an even larger demand: the share of households who rent is estimated to be 36 percent by 2015, an increase of a full five percentage points from 2005.
According to the U.S. Census, there were almost 115 million U.S. households in 2010, implying about 41 million households will rent in 2015. While it's hard to calculate precisely how many of those will want to rent single-family homes, at an average of 2.6 persons per household, it's likely that many will.
Next, let's take a look at supply. Almost 11 million homeowners have negative equity in their homes, and almost five and a half million single family mortgage loans are in some stage of delinquency. Again citing the analyst's study, if just half of those distressed loans were resolved via foreclosure or short sale, that would equate to 2.7 million homes that will need to be repurposed and absorbed into the market.
To read the full article, subscribe to the Foreclosure News Report and receive the March issue free if you subscribe before April. 30.
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