Bay Area home sellers opting to rent

August 8, 2008 5:54:37 PM PDT
Frustrated Bay Area homeowners, who have been trying to sell, are opting to put their homes up for rent instead of lowering the sales price again. Meanwhile, many people now looking to rent those homes are would-be homeowners, just waiting for sales prices to go down again.

There are more and more rental signs going up in the Bay Area. That's because more and more homes that were for sale, are now for rent, even it means the owner loses serious money in the short term. Consider a $2 million house, even with 30 percent down.

"You're going to have monthly payments between $9,000 and $12,000 a month. Right now you can rent that same home for between $5,000 and $6,000 a month," said Ed Basaldua, Parkone Properties.

Basaldua says the home sellers who aren't selling and home buyers who aren't buying, are waiting for the exact same thing - the market to improve.

"A lot of the renters I'm getting for these homes are would be buyers, but when they look at difference between rent and mortgage - they see little chance of gaining any equity through appreciation over the next couple of years, so they're opting to go the rental route," said Basaldua.

A five bedroom , five-1/2 bath, 5,000 square foot home could have been had one year ago for $4,000, maybe $4,500 a month; now, because of demand, it's on the market for $5,500 a month.

None of this is news to Chris Mohammed, who has spent 30 years in real estate finance. Her 4,000 square foot home in Livermore has been for sale since September - nothing panned out, so now it's for rent, or actually, it's for sale and for rent.

"I've offered this for a lease option or for rent, so if somebody wants to lease option it to purchase within a year that's fine too. So I am going to try to use all avenues within real estate, things that were old are new again," said Mohammed.

"We're in unchartered territory," said Prof. Cynthia Kroll, UC Berkeley Haas School of Business.

She says when lenders are done dumping foreclosed homes at below market rates; it might be time for people to revisit the market.

"Once they've gone through their inventory and they are out of that business, prices may go up again, but we don't know what an average price or a normal price is right now," said Kroll.

Which explains the reluctance to sell a house at less than what it used to be worth. And why Chris Mohammed is hoping she'll soon be a landlord.

"Anything you want to add about renting?" asked ABC7's Terry McSweeney.

"Yes, call me, rent my house," said Mohammed.


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