Last year, when I was renting out an investment property in the Southern California desert, I found myself competing on price with homes that were larger, in better neighborhoods and offered nicer appointments. "How could this be?" I asked myself, before being forced to drop my asking rent by 20%, which was ok because it still at least paid the mortgage. The answer? These owners were desperate, and likely trying to get any cash in the door to stave off default and foreclosure. Although I'd try to explain this to potential tenants, they only thought of the short-term benefit, clearly not worried about the potential midnight knock at the door by a Sheriff with an eviction notice.
This year the downturn that hit the single-family and condominium home market is moving to commercial markets, which includes apartment buildings. For Phoenix-area renters at apartment complexes owned by Bethany Holdings Group, they're getting caught up in a meltdown that will very likely rob them of their deposits because the law doesn't protect them when there is a change of ownership. Given that, I wonder how many will simply take a hatchet to the kitchen counter and invite neighborhood animals to mark the carpets? From an MSNBC story:
Nicholle Krause first noticed the weeds sprouting in the usually well-manicured grounds of her 320-unit apartment complex in Chandler, Ariz., in December. Soon, signs of neglect began multiplying: Garbage spilled over from the dumpsters, the water in the swimming pool turned a slimy pea green and the grounds were infested by swarms of bees — especially alarming because Krause is severely allergic to bee stings...
It wasn’t until early March that Krause and other residents learned why the complex – the alluringly named Alante at the Islands — was rapidly going to seed. The property owner, Irvine, Calif.-based Bethany Holdings Group, had abandoned the complex and a dozen other large rental properties in the greater Phoenix area after defaulting on hundreds of millions of dollars in loans.
As panicked renters in Arizona began holding public meetings to explore whether they could walk away from leases, recoup security deposits or sue, it became clear that the scale of the mess was far larger than they had realized. Companies under the Bethany umbrella owned at least 60 — and possibly many more — large residential complexes across the nation, all of which are now believed to be in bankruptcy or receivership, potentially affecting tens of thousands of renters.
The Bethany Group meltdown highlights how few protections exist for renters caught in the foreclosure crisis. That’s a situation that some experts say is becoming much more common...
Click here for full story.
Today I was quoted in a story by the Ventura County Star about why rising foreclosures in the state and in Ventura County are bucking the national trend of falling foreclosures -- at least for now. So why the contrast? In part because foreclosures as much easier to process in California than in many other states, which require a court process. In addition, a combination of our high unemployment and the fact that many parts of the state were ground zero for the housing bust would mean we could be on the leading edge of higher foreclosures nationally after the start of 2012.
