MANATEE -- Although the housing market is improving, the myriad of recession-battered borrowers pushed out of their homes through foreclosure or short sale have put a demand on rentals.
Many have credit too bruised to immediately buy again, or given what they just endured, are too fearful to try, experts say.
Because home prices have slipped drastically, many investors also are jumping back into the landlord business -- buying depressed properties for reduced prices, giving them a quick fix and renting them out for a profit.
The combination of factors has woven a rental market stronger than Florida has seen in a decade.
“The rental market has really exploded with what’s been going on with the foreclosures, short sales and jobs,” said Marcus Vanzant, broker and owner of Marcus & Co. Realty in Bradenton. “Unfortunately, a lot of families are in this situation.”
When Southwest Florida’s housing market was ballooning to historic heights from 2003 to 2006, the area’s rental market essentially vanished.
Corporations were converting their apartment complexes into condos. The thriving economy gave life-long renters confidence to buy, and the prices of homes were so inflated, real estate investors couldn’t gain a return through monthly rent.
The bubble burst has swamped the courts with 212,250 foreclosures over the past five years in Manatee alone, records show.
Needing a place to live, those families have turned to rentals.
Many banks have guidelines that prevent them from writing loans to anybody with a foreclosure or short sale on their credit for as long as seven years, according to industry associations.
Progress in the job market also has opened the door to more renters -- workers previously staying with family or friends during hard times, said Michael Saunders, founder and CEO of Michael Saunders and Co.
“We had so many apartment complexes convert to condos during the boom, the supply was drastically reduced,” Saunders said. “And as we got into a time of big demand again, we didn’t have enough inventory to meet it.”
Saunders dropped its rental division, which managed about 800 units, in the early 2000s. The company has since returned to the market with a vengeance, reopening a full-service rental division in October.
Increased demand also has made the rental market more attractive for investors, who have purchased depressed properties from the same homeowners forced to walk away.
In fact, nearly one-third of all homes that change hands under the $200,000 mark are purchased by investors, interested in renting a property for five to seven years before they flip it, Saunders said.
“They have the cash, and with real estate rent, they can get a better investment than the stock or bond market,” Saunders said. “They’re really creating the supply we need to meet this demand.”
Other homeowners now underwater are attempting to rent their property to get out of an unaffordable mortgage, and buy another place to live while the prices are low.
The trend has caused average rents in the Bradenton area to spike -- jumping 5 percent in 2011 alone, according to Michael Saunders’ research.
Property managers expect similar results for 2012.
“A couple of years ago things were tough,” said Andrew Harrington, owner and broker of Oakleaf Property Management in Bradenton. “We were driving down rates to renew leases just so people would stay, but it’s been getting better and better.”
Oakleaf manages about 150 properties in the Bradenton area, with a mix of single-family homes and apartments.
The firm has seen its average monthly rents for a two-bedroom unit climb to $683, a 7 percent jump from two years ago. The company’s vacancy rate has slid to 2 percent.
Market conditions for multi-family units nationwide were similar. For the seventh time in the last eight quarters, all four indexes that measure health in the rental market -- including market tightness and sales volume -- were at or above 50, indicating growth from the previous quarter, according to a report released this month by the National Multi Housing Council.
The favorable conditions for landlords have more real estate firms targeting investors interested in buying property to rent. Others like the Re/Max Alliance Group now are catering to the trend by forming rental management divisions.
“It’s come full circle,” said Peter Crowley, broker and co-owner of Re/Max Alliance Group in Bradenton. “Because of current home prices, it makes a lot of sense for somebody to buy a home, hold onto it and rent it out.”
Wagner Realty, which manages 1,200 rentals in Manatee and Sarasota, also has upped its rental marketing efforts aimed at investors.
The company has seen demand run high from Lakewood Ranch to downtown Sarasota and just about all of Manatee County, said Ron Cornette, manager of the firm’s rental division.
“All of our rental offices have the same problem,” he said. “The phones won’t stop ringing.”
Josh Salman, Herald business writer, can be reached at 941-745-7095. Follow him on Twitter @JoshSalman