Foreclosures create more 'accidental landlords'
LANSING —There’s no question that home ownership is down in Michigan. And property managers and the U.S. Census Bureau report the number of owners renting out their homes is up because of a poor housing market.
Jared Bundgaard, owner of Michigan Property Managers in Berkley, blames the trend in part on people losing jobs and moving out of state. Because homeowners can’t sell their property for as much as they paid, he said, they’re renting to have a better chance of recouping their investment.
He calls such individuals “accidental landlords.”
While living in another state and paying mortgages in Michigan, the homeowners are essentially going broke and are forced to rent out their house to avoid foreclosure, Bundgaard said.
“Homeowners have no other choice but to rent,” he said. “The only buying that’s going on is more or less investors and people looking for opportunities.”
Charles Ballard, a professor of economics at Michigan State University, said there are two main reasons that more people are becoming tenants rather than buying.
First, he said, lenders’ standards for issuing mortgage loans have gone up.
“Credit conditions are tighter than they were before,” Ballard said. “The meltdown of the credit market led to a recession, and that really hurt the labor market.”
Second, Ballard said, homeownership isn’t as appealing as in the past.
“It’s lost some of its luster,” he said. “Renters have the advantage of not being tied down to that home.”
Michigan historically has had one of the highest rates of homeownership in the country. When ownership peaked nationally in 2004 at 69 percent, the state was at 77 percent, according to the Census Bureau.
But the number of homeowners in Michigan has dropped about 1 percent annually for the past five years, the agency said.
RealtyTrac reports that in October, one of every 235 Michigan homes was in foreclosure, while the national rate was one in 389.
Among the 10 counties with the most foreclosures were Wayne, Oakland, Macomb, Genesee, Kent and Ingham, said RealtyTrac, a national online marketplace for foreclosed properties.
Meanwhile, the proportion of homes rented out has risen about 1 point each year, it said. Property management companies attribute the change to more foreclosures in a rough housing market.
Kelly Pangburn, a broker for Pangburn Properties in Grant, said she’s seen an increase of clients seeking to rent out their property in the last six months.
Pangburn said she understands why they’re coming to her, although she normally doesn’t handle property management.
“They just don’t know where else to turn,” she said. “We don’t have a facility or some kind of website for someone to look up for rental property.”
Many owners want to rent out their property either because they can’t sell it or because they can’t afford it, putting them on the verge of foreclosure, she said.
The Michigan Association of Realtors said home sales in October were down 23 percent from the same month last year.
“For the last two years, that’s when it started getting more intense,” Bundgaard said.
In the last month, about 20 people asked Bundgaard about renting their homes because they can’t sell them, a larger number than usual.
“It’s becoming more common today because their houses aren’t selling,” said Pangburn. “And if they are empty, they are considering renting.”