A recent Register story by Mary Ann Milborn discussed how when banks foreclose on investment properties, tenants often end up on the street and lose prepaid rent and deposits. The story says ….

Brenda Magana, a housing specialist at the Fair Housing Council of Orange County, says the problem is snowballing. “Last year we were seeing three or four tenants (facing foreclosure) a month,” she says. “Now we’re seeing three or four a day.”

Dianna Baumann, a Tarbell Realtors leasing agent in Mission Viejo who represents tenants, recounts horror stories of renters caught up in the mess. In most cases, she says, the first time the tenant knows there’s a problem is when the notice to vacate is tacked on their door.

Increasingly she is seeing situations in which a landlord leases the property after already getting behind on the mortgage. Some have even received a notice of default, the first step in foreclosure. In many of these cases she says the owners pocket the tenant’s first and last month rent and security deposit instead of bringing the mortgage payment up to date.

“They know they’ll need to find a place to rent, too, so they just use the (tenant’s) money to rent a place for themselves,” says Baumann.

To read the rest, CLICK HERE!

April’s Consumer Price Index showed a continued slide in the SoCal rental market, with rents rising 4.2% from April 2007, the lowest annual increase since September 2000, according to the numbers crunchers at the U.S. Bureau of Labor Statistics. A year ago, rents were going up at a 6.4% pace.

Landlords in the Los Angeles-Orange County-Riverside area, however, still were raising rents. In 1995, at the height of the last big recession, rents declined at a 0.4% annual rate.

Annual rent increases for homeowners renting out their house were 3.6% higher in April than in April 2007. Last year, the so-called owners’ equivalent rent of a primary residence grew at a 6% pace in April. The price overall to keep a roof over your head (minus purchase costs) rose 2.5% over the last year, the slowest rate since March 2004 when it was 2%.

Other local consumer housing price news:

• Fuels and utilities overall jumped 7.2% in the last 12 months
• Residents using natural gas saw prices surge 27.8% annually
• Household furnishings, hit by the housing downturn, continue to be a bargain, with prices down 3.4% in the last year.

LA-OC-Riverside CPI rent changes

CLICK HERE for other local April consumer price info. CLICK HERE for Fast Food Maven’s take on grocery prices. For the full CPI press release, CLICK HERE.

Other recent rental news:

• House/condo renters latest victims of foreclosures
• Newer O.C. apartments suffer more vacancies
• Insider Q&A hears of tough times for landlords
• Home/condo rentals not hurting apartment rentals
• What niche will be real estate’s star?
• Could foreclosures help increase affordable rental stock?
• Bad O.C. economy hits 1-bedroom apartments
• Foreclosure refugees head for O.C. apartments

REIS Inc. reports that during the first quarter, O.C. apartments built after 1999 had 2.5 times the vacancy rate of the county as a whole.
Countywide vacancies were 4% in the 784 O.C. complexes that REIS studied. Units constructed after 1999, however, had a 10% vacancy rate. The oldest apartments — built before 1970 — had the fewest vacancies at 2.8%.

Rents made the difference. Apartments built before 1970 rented for $1,359 while those constructed after 1999 went for $2,055. The average county rent was $1,550.

Related items:

• Investor/attorney sees tough times for landlords
• Bad O.C. economy hits 1-bedroom apartments
• Foreclosure refugees head for O.C. apartments
• O.C.’s high-rent districts suffer higher apartment vacancies

Stephen C. Duringer at Duringer Law Group PLC in Anaheim is a longtime attorney who specializes in landlord tenant law. He also owns residential and commercial rental properties throughout California. He is past president of the Apartment Association of Orange County and serves as a Superior Court judge pro tem. With dueling pro- and anti-rent control measures on the next state ballot, expensive rents and a slowing economy, Duringer provided this take on the state of the apartment biz … 

Us: What are some of the changes you’ve seen in the apartment industry since you started?
Duringer: The rental housing industry has experienced strong and sustained growth over the past 20 years. Even with the current revaluation cycle, multifamily properties have maintained their values. Throughout the state we’ve seen troubling increases in governmental oversight of housing, expansion of rent control jurisdictions and eviction controls. These cities quickly become stagnant, eliminating market incentives and motivations for investment and improvement by owners. A drive through many parts of Los Angeles reveals dilapidated housing, graffiti, crime and infrastructure in disrepair, and is a stark reminder why we don’t want that here in Orange County. A more troubling trend is an increasingly confrontational relationship between landlords, tenants, and fair housing advocates. Litigation is rampant. Disputes, that often can be resolved with a phone call now end up in court, increasing the cost of doing business and creating a climate of distrust. Most troubling, I’m seeing the next generation of owners, the children of the current owners, not wanting to get into the business because of the adversarial and confrontational climate.

Us: You’ve said Orange County has been insulated from a lot of these trends. Why?
Duringer: Orange County recognizes the importance of a strong rental housing industry. The continued growth and vitality of OC is dependent on our ability to house our most important asset, our employees. A readily available pool of talent allows our business community to continue to thrive and to prosper. The Apartment Association of Orange County has been very effective in working with local cities in proactively eliminating the problems generally associated with rental housing. The private sector is clearly the most qualified, and has the greatest incentive, to improve and enhance the housing stock. By educating owners and managers through courses offered by the AAOC, most of the issues facing other parts of California are either non-existent or are extremely rare here in Orange County. Owners learn effective tenant screening practices that effectively keep the bad elements out of our buildings, and out of our neighborhoods. Owners and tenants generally work well together in Orange County. Code enforcement officers here in O.C., for the most part, recognize that the vast majority of owners are responsible business persons, and truly desire to maintain their properties. Although not perfect, Orange County’s rental housing community is doing a very good job.

Q: What are you hearing about the most these days from landlords? (more…)

The National Multi Housing Council says large apartment complexes aren’t seeing a lot of competition from condos and homes now coming onto the rental market.

“Even though there has been an increase in the number of condo and single-family rentals, these properties do not typically compete for the same renters as professionally-managed apartments,” says Mark Obrinsky, NMHC’s chief economist. “In fact, professionally-managed properties may become even more desirable in the current market as renters of many of these individually-owned condos and houses find themselves without housing because the owners of these properties have lost the property to foreclosure.”

The mortgage meltdtown also appears to have put the brakes on tenants moving out to buy homes. Thirty-one percent of apartment industry executives surveyed nationwide said they have seen a big decrease in the number of renters leaving to become homeowners. That compares to 22% six months ago.

Another 52% in the latest survey said they noticed a small drop in move-outs due to home purchases, down slightly from 53% last October. (CLICK HERE for the full survey.)

Related items:

• Bad O.C. economy hits 1-bedroom apartments
• Foreclosure refugees head for O.C. apartments
• O.C.’s high-rent districts suffer higher apartment vacancies

The National Association of Real Estate Investment Trusts reports that self-storage REITs remain the place to put your money this year.

For the first four months of 2008, self-storage REIT stocks are up 23.83%. That should come as good news to investors who saw their self-storage REIT stocks plunge by an almost equal amount — 24.82% — last year. Among the other top-performing REITs through April 30 of this year:

• Apartments: 14.87%

• Shopping centers: 10.14%

• Regional mall: 9.39%

Mortgage REITs continue stuck in the basement this year. Home financing REITs dropped 15.04% and commercial financing is down 10.01%. Overall stock REITs are up 7.34% so far this year. (CLICK HERE to view the full report or CLICK HERE for an earlier story on REITs.)

Harvard housing researchers think the foreclosure crisis provides a good opportunity for the federal government to add to the stock of low-income rental properties.

A new report by Harvard University’s Joint Center for Housing Studies argues that the nation’s policy on low-income housing got out of whack when the federal government placed its emphasis on homeownership over increasing the supply of affordable rental properties.

As a result, as low-income homeownership rose, the availability of Section 8 and other affordable rentals shrank. But they think the foreclosure crisis could help remedy that.

Among their suggestions:

• On the financing side, one strategy would be to perfect pooled approaches to acquire several properties with a single financial transaction.

• On the equity side, new types of real estate investment trusts could be designed to raise capital from private investors to invest in smaller apartment projects. This funding would breathe new life back into the stock of older multifamily properties, which are such a crucial component of the affordable rental housing supply in many communities.

• As the volume of foreclosed properties mounts, many holders of these assets will be forced to sell at deep discounts. This creates an opportunity for well capitalized players to purchase and manage distressed portfolios for a profit.

The report’s conclusion:

“What is needed is a mission-driven entity — a community preservation fund — that could participate in this market but with the goal of creating affordable housing and stable communities rather than simply maximizing profits. With skill and foresight, the nation could capture a significant share of good-quality housing at today’s depressed prices to create the next generation of affordable rental housing.”

CLICK HERE for the full report.

Read these other recent stories on the rental market:

• Bad O.C. economy hits 1-bedroom apartments

• Foreclosure refugees head for O.C. apartments

• O.C.’s high-rent districts suffer higher apartment vacancies

M/PF YieldStar found new evidence of a softening economy in O.C. — one-bedroom apartments were slower to rent in the first quarter while two- and three-bedroom units were in higher demand. That’s a switch from last year when one-bedrooms were the hardest to find.

At the end of March, 4.6% of one-bedrooms were vacant, while the vacancy rate in two-bedrooms was 4.4% and three-bedrooms 3.5%. Vacancies countywide were at 4.4%. (That’s still better than the nation as a whole, which had a 6% vacancy rate.)

Greg Willett, vice president of research and analysis at Texas-based M/PF YieldStar, notes that when times get tough, people double up with roommates. Here’s how his reports sees it:

“Orange County actually is one of the few metros across the country showing those occupancy patterns that normally come with recession. In other spots, larger apartments with two or more bedrooms are struggling just as much as smaller apartments, since those larger units are vulnerable to losing residents to single-family homes offered for lease. That shadow market of single-family rentals doesn’t seem to be having much effect on the performance of Orange County’s apartment sector because the premium to rent a house versus an apartment is much bigger in Orange County than in most other locations.”

Willett says rising vacancies are putting a damper on rent increases. As of the end of the first quarter, M/PR YieldStar says rents were going up at a 3.2% annual pace in O.C., the slowest since 2004. Units built before the 1970s were doing a little better, with 4% to 5% increases over the last 12 months. Rents averaged $1,534 in the 110,300 O.C. units surveyed.

M/PF YieldStar outlook: Orange County apartment occupancy will dip a little further during the near term and annual rent growth will cool to about half the pace seen now. CLICK HERE for the full M/PF YieldStar O.C. report.

Read these other recent OC rent stories:

• Foreclosure refugees head for O.C. apartments

• O.C.’s high-rent districts suffer higher apartment vacancies

• Tenants tighten belts to pay rent
  

The folks at Consumer Credit Counseling Services of Orange County may be seeing the first wave of refugees from foreclosures hitting the local apartment market.

Kelly Rogers, director of education at the credit counseling service, says there was a noticeable jump in people calling the office for credit counseling help early this year. Their problem: After losing their homes to foreclosure, their credit was shot and landlords were reluctant to rent to them.

And it’s not just people foreclosed in O.C. looking for apartments here.

“A lot of people from the Inland Empire, who work in Orange County, are coming back to Orange County to rent,” Rogers says.

Rogers says she understands both sides when it comes to creditworthiness of people who’ve been foreclosed. She’s in the process of renting out her one-bedroom, one-bath Fullerton condo so she and her husband can move into a bigger place they just bought.

“As landlords now, we’ve really started looking at credit history,” she says.

Despite reports that O.C.’s rental market is softening, Rogers says she’s been overwhelmed by the demand for her condo.

“We thought we might have to lower the (asking rent),” she says, “But in only two weeks, we’ve gotten more than 100 hits.”

CCCS of Orange County is a non-profit service to help people with financial problems. They provide credit, foreclosure and bankruptcy counseling as well as workshops on budgeting, homebuying and how to handle your finances. It can be reached at 800-213-2227.

For earlier stories on O.C.’s apartment market:

• O.C.’s high-rent districts suffer higher apartment vacancies

• O.C. apartment vacancies hit near 13-year high

• OC/LA rent hikes lowest in 8 years

Annual survey of global rents by ECA International, corporate human resources consultants, finds that Hong Kong’s still the priciest big city on the planet to rent a typical three-bedroom apartment. Cost, in U.S. do9llars by ECA’s math? $9,734 a month! Compare that to a global big-city average of $2,950.

Six of the top 10 priciest locales were in Asia — Hong Kong plus Tokyo (4th), Mumbai (6th), Seoul (7th), Singapore (9th) and Ho Chi Minh City (10th.) Moscow (2nd), New York (3rd), London (5th), and Caracas (8th) filled out the top 10 of the 92-city study of rents, in U.S. dollars, as of September ‘07. Read more HERE!

ECA doesn’t track O.C. rents. (Latest average local rent, per Real Facts, was $1,696. Don’t know if that’s comparable to ECA’s numbers, though!) But ECA found L.A. rents rank 31st on the globe, down from No. 29 the previous year. San Francisco was 23rd; San Diego was 66th.

The cheapest on this list? Karachi in Pakistan.

BusinessWeek reports in yet another unflattering portrait of the sagging O.C. economy by a national news organization this gem …

Scott Simon, who heads housing industry analysis at Newport Beach-based money management firm Pimco, recently sold his home with a view of the ocean in nearby Laguna Niguel. He was surprised that the property got several offers and went for close to his asking price, to a European buyer. “Good properties are still trading at pretty good prices,” he says. “You come apart from the worst first.” Still, Simon says he’s renting for now. It’s cheaper than owning, and he thinks lower prices lie ahead, particularly if government support for the housing market wanes. Housing, he says, is “the single most important thing in the economy right now.”

Fellow Pimco bond trader Mark Kiesel grabbed a few media notices in ‘06 when he sold his O.C. home and very publicly noted it as a trade against local home prices in an widely distributed economic commentary. See your blogger’s recent chat with Kiesel HERE.

Last month, CNNMoney.com rehashed the reputation of Irvine as the flashpoint for the subprime lending debacle and its local economic fallout with a piece headlined “Welcome to subprime’s ghost town.” (See it HERE.)

Perhaps the most enlightening slice of the BusinessWeek report (find it HERE) was a slide show of local homes in foreclosure dubbed “The Real (Foreclosed) Homes of Orange County.” To see it, CLICK HERE.

The numbers crunchers at Real Facts show O.C.’s high-rent areas took the biggest first-quarter hit in apartment vacancies, while more affordable communities showed strong occupancy. As a result, Newport Beach, where first quarter rents averaged $1,965, saw vacancies hit 7.2%. Meanwhile Buena Park, where the average rent went for $1,300, had a tight market with 2.4% vacancies. (The quarterly survey was based on 123,620 units in O.C.’s 488 largest apartment complexes.)

Here’s a look at Real Facts’ tabulation of local rents and vacancy rates …

*The Costa Mesa vacancy number is skewed because a large new project that just started renting opened in the first quarter.

Last week, the USC Lusk Center’s Real Estate Economics Forecast also predicted higher vacancies in Irvine and Newport Beach due to high rents and more than 4,000 new units coming online. To see that report, CLICK HERE. To read an earlier item on O.C. vacancies hitting a 13-year high, CLICK HERE. For the latest on O.C. apartment news, go to the Register’s Real Estate News section and CLICK ON APARTMENTS.