Foreclosures add to tight rental market, Mercury News

Lupe Parga and her family must find a house to rent, and soon. In late June, the 4-bedroom home she and her husband owned in San Jose's Evergreen neighborhood was foreclosed upon. Parga, her husband, their four kids and Parga's sister's family are all still living there while seeking a rental that can hold both families. Meanwhile, they're trying to stave off eviction from their former property.

"It's really hard. Things are just getting rented right away," said Parga, an accountant who was recently laid off from her job with a janitorial services company.

Parga said she's applied for about a dozen rentals in the area since July, and is prepared to pay about $3,500 a month for a house with at least four bedrooms. But she's had no success yet.
Record numbers of Silicon Valley homeowners have been foreclosed upon this year, and most must seek rental housing once they leave their homes. If tenant-occupied houses are in foreclosure, tenants nearly always get evicted, pushing them into the rental market again. And many renters who could afford to buy homes size up the bleak economy and opt not to take on mortgages and home ownership.

The result: It's a competitive market for those seeking reasonably priced rentals, and it's a pretty good time to be a landlord.

"The rental market has definitely become tighter in the sense that rents are going up," said Martin Eichner of Project Sentinel in Sunnyvale, an organization that provides landlord-tenant dispute resolution services, as well as foreclosure prevention help. Average apartment rents rose 5.2 percent in Santa Clara County in the third quarter, to $1,708 a month, according to RealFacts, a Marin County firm that measures average monthly rents for all types of units in complexes of at least 50 units.

But rent increases in the third quarter were not as steep as in the second quarter, a sign of the softening economy. And RealFacts said apartment complexes were 95.6 percent full in the July-to-September quarter, down from 96.7 percent a year earlier.

One reason apartment occupancy rates are slipping is that more single-family houses are coming onto the market as rentals, said Joshua Howard, executive director of the local division of the California Apartment Association. Some of those houses are previous foreclosures that were purchased by investors.

"That's providing competition to multi-unit buildings," Howard said. "The rental housing economy has more options available right now."

Michelle Harris, for example, owns a two-bedroom house near Interstate 280 at the north edge of San Jose's Willow Glen neighborhood. While she was fixing it up to rent in July, she placed an ad online, asking for monthly rent of $1,800. The volume of responses, and the aggressive tactics of some of the applicants, told her she'd set the rent too low, Harris wrote in an e-mail to the Mercury News. Because of renovation delays, she didn't rent the house out until September. By then she'd set the rent at $2,300, and still had a list of qualified tenants from which to choose.
"Everyone I showed the house to told me about the tight rental market," Harris said. In the end, she chose a couple who had damaged credit because they had gone through foreclosure. "But I could tell they were good tenants so I let them have the house," she said.

Ron Stern, owner of the rental listings subscription service Bay Rentals, said most of the local landlords who list with him "are not too drastically raising rents because they know the economic situation out there won't support that." And, he said, many landlords are more averse to pets than they are to foreclosures on tenants' records — as long as the tenants have not completely ruined their credit by falling behind on all their other debts as well.

Along with economic uncertainty, high gas prices have affected the rental market, Howard said. Members of his apartment industry trade group report that tenants are less willing to live far from their jobs than in years past, and would rather share housing close to their work than pay the high price of commuting. In addition, some apartment managers say all their two-bedroom units are occupied, but not one-bedrooms, indicating that more renters want to economize, splitting the rent with a roommate.

Despite slightly increased vacancy rates at apartment complexes, the market remains very tough for renters like Lupe Parga, with poor credit and the need to move soon. Parga said she will keep searching for a rental house in the Evergreen area, so her children can stay at the schools they now attend. She said she'll be sorry to leave her house, which she and her husband bought from her grandmother for nearly $800,000 in early 2006. Its value has fallen to about $600,000 this year. Even with family members' help, they couldn't afford the payments on their adjustable-rate mortgage, and they fell into foreclosure. They have stalled eviction by trying to find family members who would buy the house back from their lender. But eviction could occur anytime now.

Having foreclosure on her credit record has been "a huge setback" when seeking to rent, she said. "Seeing the way things are, you'd think people would be a little more lenient. "... I'm sure there's a lot of people in this situation." To find rentals in South Orange County Ca, just call Deborah at: 949-521-3512 or go to my site to search yourself at: Search Orange County Rentals Yourself!!