While residential real estate sells for less, rental units continue to rent for more. The sale price for a home fell 4.5 percent from February 2011 to February 2012. Rents increased 2 percent in that same 12 month period. The rental market is strongest in those areas that show the largest decrease in home values.
The metro area in Chicago is one example. Rents went up 8.6 percent and home values went down 11 percent in the last twelve month period. Another area is metropolitan Philadelphia, where home values went down 5.4 percent and rents went up 14.8 percent. It is the high number of foreclosure properties for sale that are to blame.
The sale of foreclosed properties was responsible for 20.3 percent of all real estate sales in February of 2012. The peak was a little higher than in March of 2011 when they made up a 20.2 percent share of all residential real estate sales. Foreclosures accounted for a 19.1 percentage in February 2011. Foreclosure sales are known to be seasonal and the first two months of the year are the busiest time.
Renters continue to pay more for their apartments. Those who lost their homes to foreclosure are in need of a place to rent to move their families into. According to one economist, the residential real estate market is slowly recovering from the recession. However, the backlog of foreclosures available at rock bottom prices is a definite roadblock on that road to recovery.
Innovative entrepreneurs are converting foreclosed residential real estate into rental units. The real estate industry is hoping that will detract from the oversupply of low-priced houses on the market. As the foreclosures are taken out of the picture, more homes will be sold at a price closer to assessed value.