I have a client who bought a brand new home in South Reno in 2005. At the time we thought she was getting a great deal in a great location at a 2004 price, thanks to some flipper that fell out of contract with the builder because he couldn’t secure another buyer fast enough. So in goes my client, and everyone’s happy.
Fast forward to fall 2007. Her adjustable rate mortgage resets to some horrendously high payment that she can’t really afford. She goes through all her options and gets on the phone with the bank. After three months, four phone calls, and many pages of documentation proving income and expenses, the bank lowers her payment.
Still, the house is too big, and she’s looking for ways to reduce monthly expenses. She decides not to sell because foreclosures in the neighborhood have driven down values significantly, and she’s not ready to take that hit on equity. Fortunately she put 20% down when she bought, so she figures she can rent the house out with only a small monthly loss. She’s done the math and figures that even with this loss, she can rent a smaller place for less that’s cheaper to heat and cool and still save money, so she goes ahead and puts her home on Craigslist.
She connects with a family from LA. They’re relocating for the husband’s job but can’t sell their house there, so they’ve decided to rent out their own house and rent here as well. My client goes looking for a smaller place and finds the perfect little cottage in Old Southwest. Turns out the cottage owner couldn’t sell his house for what he wanted, so he’s renting it out as well.
Which makes me wonder… how many reluctant landlords are there now? Renting their houses instead of selling? And how many rentals like these can our market absorb? There are reports on the rental market in Reno-Sparks, but they’re based on multi-units versus single family because there’s really no reporting mechanism for the thousands of individual landlords out there. It’s definitely a shadow market that would be interesting to track.