With foreclosures still looming over the housing market and continued lack of job security on the horizon, many residents have opted for a more temporary means of housing – rentals.
Stones River Property Management, which handles rental properties throughout Middle Tennessee, has seen an estimated 20- to 25-percent increase, said President Ron Hodges.
Along with the increase in demand has been an increase in rental property, he continued.
“There are more single family houses being put on the market to lease,” he explained, adding that the rise is “either because they can’t sell (the house), or they’re going to have sell it for a loss, so the viable approach would be to rent it (to someone else).”
The local spur in activity is reflective of a national trend, according to data released by Reis Inc., which provides commercial real estate performance information and analysis at the metro, submarket and property levels.
According to the report, in the final quarter of 2011, the apartment sector experienced its largest quarterly increase in occupied stock of the year. Additionally, the vacancy rate dropped to 5.2 percent, or the lowest since 2001 and lower than the most recent cyclical drop in 2006.
While many rental properties in Murfreesboro house MTSU students, particularly those near to campus, Stones River Property Management caters more to families. Hodges said he has witnessed growth in the company’s executive rentals, or home worth between $250,000 and $350,000.
Families availing themselves of executive rentals, he said, typically do so for one of two reasons: either they have relocated to the area and need to rent until their home sells, or they’re not in a position to qualify for a home loan but still bring home a substantial salary.
“The banking rules have changed, the market is high and houses aren’t selling,” Hodges said of the increase in renters.
Despite anemic job growth in the weak economy, credit quality among rental applicants improved slightly in the third quarter of 2011, compared to the third quarter of 2010, according to CoreLogic SafeRent, provider of screening and risk management services designed for the multifamily housing industry.
The Multifamily Applicant Risk Index for third quarter of 2011 is based exclusively on traffic credit quality scores from the CoreLogic SafeRent statistical lease screening model, and it is updated quarterly to provide property owners and managers with a benchmark against which to compare their portfolio’s performance.
Data shows that the national index, which includes studios, one-, two-, three- and four-bedroom units was 104, compared to Nashville-Davidson--Murfreesboro--Franklin’s index of 107.
An MAR Index value of 100 indicates that market conditions are equal to the national mean for the index’s base period of 2004, the report explains. It also indicates conditions with reduced average risk of default relative to the index’s base period mean. A value less than 100 obviously means the opposite, or market conditions with increased average risk of default relative to the index’s base period mean.
Stones River Property Management’s Hodges said his experiences support the data.
“Credit worthiness in the rental market doesn’t seem to be as big of an issue now as it was (in the past); however, a caveat is that you’re seeing a lot more families that have foreclosures,” he said. “Their overall credit worthiness is okay, but the blemish will be that they have had a foreclosure. Their credit score is not great, but only because they lost their homes.”
Single-family home construction has slowed over the years, and only within the past couple months have builders sought approval to construction homes within existing, unfinished subdivisions.
On the other hand, city officials gave the OK in mid-December for The Pointe at Eastdale, which calls for 60 multifamily units along Bradyville Pike, along with 244-unit Aspen Height to be located on South Rutherford Boulevard and two four-family dwellings near Medora Court and Bentley Street.
Construction is currently underway on Dill Lane, just off Mercury Boulevard, for 14 three-story buildings of 260 upscale student apartments.
“I think, overall, the rental market is much stronger than the sales market, and it doesn’t look like there’s any sign of the rental market slowing down right now,” Hodges said.
While these multifamily projects won’t be completed for months, Hodges said he believes there will still be a market for rentals in the future.
“That’s based on growth in the market in the area,” he said. “Both (single-family and multifamily) markets will remain strong until we get a real up-tick in the economy.”