High Cost of Rentals Attributed to Foreclosed Residential Real Estate

April 13, 2012 / Russell Legato, Residential Property Analyst

With residential real estate sales beginning to recover in many areas, rental units are still in great demand. The cost to rent is higher. The cost to purchase a foreclosed home, for example, is still low. According to the Zillow® Real Estate Market Reports for the month of February, the average rent increased by 2 percent from February 2011 to February 2012. Residential real estate values were down by 4.5 percent in that same period of time.

High Cost of Rentals Attributed to Foreclosed Residential Real Estate

There were 8 percent of areas reported on that showed an increase in home values. In contrast there were almost 68 percent that showed a decrease. The demand for rental units is strong in areas where the value of homes has declined.  Philadelphia and Chicago metropolitan areas saw 14.8 and 8.6 percent increases respectively.

It is easy to assign responsibility for the situation to foreclosure. The high number of sales of foreclosed properties leaves the industry with less demand for homes selling closer to their assessed values. In January and February, which are the peak months for real estate sales, a 20 percent share of all sales were of properties being sold after foreclosure in 3 major geographical locations.

Zillow, Inc. is the place to find vital information about real estate listings, mortgages and related topics. They provide statistics at all levels from state to neighborhood. On April 10, 2012, a complete national report was published and made available on the Internet. The information is collected from public records and calculated for all geographic locations.

There is the Zillow Rent Index, which shows an estimated monthly rental amount for a specified area. The Zillow Home Value Index gives the average listing price for residential real estate on a given day. This index does not take into account whether a property sold for the listing price.

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