Rental market could lead real estate recovery

As lending standards continue to create obstacles for prospective homebuyers, the rental market has seen a significant upswing, which could be an indicator of a housing market recovery.

As lending standards continue to create obstacles for prospective homebuyers, the rental market has seen a significant upswing, which could be an indicator of a housing market recovery.

According to the Los Angeles Times, rental prices are surging as a result of the foreclosure crisis that occurred in the wake of the housing market collapse. The households that endured this process are now working to repair the safety and soundness of credit ratings and personal finances in the hopes of one days reclaiming their status as homeowners. In the meantime, they will be part of the rental market.

"Fundamentally, it is an issue of supply and demand," industry expert Stan Humphries told the newspaper. "The foreclosure crisis is essentially a giant engine converting owner households into rental households."  

Meanwhile, Coalition for Economic Survival executive director Larry Gross noted that the current housing market is struggling in nearly every sector expect in rentals. However, a fragile job market paired with rising rents and utilities could threaten the market's stability in the future.

In order to create a greater number of rental options, the government is introducing a pilot program that would work to sell REO properties held by Fannie Mae and Freddie Mac to investors. Many of these homes will then be converted into affordable rental units.



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