Will the Sub-Prime Housing Market Decrease Vacancies at Apartments

With all the foreclosures occurring around the nation, how will this affect the apartment market? After all, if homeowners are forced to move out of their home, they would be forced to look elsewhere? So it might make sense to believe that apartment vacancies would see a major decrease.

It has been rumored that the Federal Reserve miscalculated the affect of rising interest rates on our economy. But recently the Fed altered its anti-inflation policy by reducing the discount rate so it could address the housing issues and other detrimental affects that were pressuring our economy. By cutting the discount rate this would reduce the rate in which banks can borrow money.

The question was, would this move save the housing market, or would homes continue to depreciate in value, and would more homeowners end up on the street with the job losses mounting.

But what about the apartment industry? Are we going to see a large influx of renters into apartment markets around the country.

Texas has some of the largest apartment markets including metropolitan areas like Houston, Dallas, Fort Worth, and San Antonio. And the area has seen more foreclosures than one can remember in recent decades.

And of course most of these foreclosures were occurring in areas were the sub-prime lending was occurring. These types of loans were offered to borrowers with low credit or bad credit ratings. And in many instances, they were not obligated to put anything down on their home. And their interest rates were low in the beginning, but increased soon thereafter.

We believe that many of these homes were in the value range of $150,000. When the homeowners soon realized that they owed more than they were worth ,they simply walked away. Or in some instances they lost their jobs and were foreclosed upon.

But would these homeowners flock to apartment communities? Almost all class "A" and "B" apartment communities will NOT allow individuals with "broken" leases or foreclosures on their record.

It is nearly impossible to find apartment communities to accept individuals with these sorts of blemishes on their credit report. The apartment communities know that they are more likely to leave again with more unpaid rent.

Many apartment locators around these cities know that it will be the lower class apartment communities that will be affected more. These sorts of communities accept the risks involved.

Keep in mind these apartment communities are much older and have management and owners that usually reflect their renters. But that is not to say they some newer apartment facilities won’t relax their credit standards to fill up their vacancies at the time.

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