Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
There’s nothing new about buying homes to rent out or resell at a profit. Residential real estate investing has been part of the American housing picture for generations.
After the housing bubble burst and foreclosures started to flood housing markets across the country, real estate investing took on a whole new level of popularity. By 2011, 20 percent of the homes sold in America were being purchased by investors, according to the National Association of Realtors.
But nearly everything in real estate moves in cycles, and there’s increasing evidence that real estate investing may have hit its peak last year and is now in decline.
A recent national survey of Realtors found that investor purchases fell slightly in 2012, down 2.1 percent from 2011. Normally, such a small dip would not cause concern, but there are a number of reasons investor purchases may not increase further. Foreclosure prices are rising, cutting profit margins, and tenants are using foreclosure rentals as a way toward home ownership, creating significant turnover.
Here are three reasons why the real estate investment boom may be slowing:
1. Foreclosures are drying up and becoming significantly more expensive.
According to recent data from RealtyTrac, foreclosure starts are down 28 percent year-over-year, even as they rose 2 percent from February to March. These slight, periodic increases occur as lenders clean up their shadow inventories—distressed properties awaiting foreclosure—now that they have new processing standards to which they must adhere.
Foreclosed homes are not the deal they once were; in February, foreclosures sold at an average discount of 18 percent below market value, according to NAR. In March—only one month later—foreclosures sold for a discount of 15 percent below market value. Recent RealtyTrac data shows that in some metros, bank-owned home prices are rising at a faster pace than the prices of non-distressed homes.
2. Future rental demand is unclear.
Single-family rentals (SFRs) compete directly with homeownership. Today, many families use SFRs as stepping stones to ownership, whether through lease-to-own programs or simply to save for a down payment. This was shown through a recent National Survey of Renters, which found 60 percent of single-family tenants expect to become homeowners in the next five years.
To some degree, demand for SFRs is tied to barriers limiting homeownership—especially tight lending standards and low inventories of homes for sale.
As these obstacles abate, will more families choose to buy rather than rent? Or is there a growing interest in renting to avoid the risks and costs of owning a home? The answers to these questions are unclear, and that uncertainty means investors may be wary of purchasing more rental properties.
3. The first signs of single-family rental oversupply are here.
Demand was so strong last year for SFRs that it took just 2.6 months to rent the summer supply of homes on the market, according to the National Survey of Renters. Single-family rents rose by 2 percent in 2011 and increased 1 percent through the first half of 2012.
Last November, Sam Khater, deputy chief economist at CoreLogic and a leading expert on the single-family rental industry, said that he expected rent growth to increase “at a strong clip” throughout 2013.
Suddenly, the single-family market has changed. Trulia shocked many landlords by reporting that through the first quarter, rents on single-family homes rose just 0.1 percent year-over-year, compared to 2.9 percent for apartments.
A major reason for this stagnation in the single-family rental market is supply. Nationally, the number of SFRs has increased by almost one-third since the housing market last peaked, according to Jed Kolko, chief economist at Trulia. That’s nearly 4 million more single-family homes rented in 2012 than in 2005.
All of this data points to slowing investor activity. But if there ever were a time to step into homeownership, this may be it.
Steve Cook is Executive Vice President of Reecon Advisors and covers government and industry news for the Reecon Advisory Report.
Cook is a member of the National Press Club, the Public Relations Society of America and the National Association of Real Estate Editors, where he served as second vice president. Twice he has been named one of the 100 most influential people in real estate. He is a graduate of the University of Chicago, where he was editor of the student newspaper. In addition to serving as managing editor of the Report, Cook provides public relations consulting services to real estate and financial services companies, and trade associations, including some of the leading companies in online residential real estate.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.