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Bobby Lehmkuhl & Danielle Dutcher's Blog

By Bobby LehmKuhl | Broker in 90265

Morgan Stanley predicts foreclosed homeowners will pay $72B in rent annually


The millions of homeowners facing default on their mortgages will likely become renters once their home is foreclosed. Investment bank Morgan Stanleycrunched the numbers and said the boost to the multifamily segment, that arm of commercial real estate that includes apartment buildings, will most likely see a multibillion-dollar boost from the looming migration.

Analysts expect a drop in the U.S. homeownership rate to 60% in the coming years from 69% at its peak.

The rate tumbled to 65% from a decade ago, the Census Bureau reported this month. It's the largest drop in 70 years.

According to RealtyTrac, there have been 8.9 million homes lost to foreclosure since 2007, the height of the credit crisis. And there is more to come in the fallout. And there are an estimated 7.5 million households either in foreclosure or delinquent on the mortgage. With the majority of these borrowers forced to pay rent over the next five years as their credit heals, this would equal $72.7 billion in incremental rent payments instead of mortgage payments.

The government is moving ahead to take advantage of the increase in demand. It's currently developing strategies to rent more of the thousands of government-owned foreclosure properties.

The mortgage industry refutes this idea and is at work tackling its plethora of problems and shortcomings. They range from what some call overly restrictive lending standards on the origination side, a dormant private-label secondary market, and ongoing issues in servicing.

 

  

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Comments

By Wes Black,  Sat Oct 29 2011, 13:39
Had not seen a number attached to this housing change. Surprising.
By Dee,  Sat Oct 29 2011, 15:03
The new housing help for foreclosures is going to be as bad if not worse than the HEMP. There are too many restrictions for most people to qualify for the approximately 10 rules. When the government is in it, it's not a good sign for the consumer to trust or able to take advantage of something had it been placed in the hands of private industry. Rents are going way up, and people have a hard time receiving a positive answer that they have passed the credit check. It's also embarrassing to be on this end of it.
By Jennifer Ratcliff,  Sat Oct 29 2011, 17:54
WOW. Hadn't seen this yet. Shows how far we have to go to get out of this fiscal mess we are in.
By Deborah Griffin,  Sun Oct 30 2011, 06:41
Perfect time to invest in rentals!

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