Thousands of Central Floridians have tarnished credit reports following a flood of foreclosures due to a subprime loans, causing property managers to reevaluate their qualifying standards. According to Lori Trainer, president of the Greater Orlando Apartment Association, qualifying agents nationwide have adjusted their thinking to be less businessminded and more humanitarian.
“Across the board, apartment boards are accepting people who have been foreclosed on, which a few years ago they would have never even considered,” she said. “They know what these people went through and that they were duped by these subprime lending companies.” For two years Archon Residential Management in Orlando has actively reached out to the subprime market.
On their Web site, they currently advertise working with all credit situations including bankruptcy and foreclosure. Now many other companies are following suit. But this does not mean the company has left itself vulnerable. “The credit criteria has been revisited to allow exceptions for those who got caught up in the subprime market,” said Archon Regional Manager Ron Wenzel.
“However, we did not adjust the criteria downward but rather set new requirements like requesting up to a three-month deposit to protect both the asset and the company, but still give the renter some leeway.” Wenzel said it is important to reach out to those with credit problems because oftentimes they avoid re-entering the rental market for fear of rejection and instead seek out private renters who might not be sophisticated enough to conduct credit checks.
“I think a lot of these people are embarrassed that they have this on their record and they do not realize that many companies are forgiving,” Wenzel said. “We are looking at the situation more these days than the person. Things are more on a case-by-case basis because we have realized that bad things happen to good people.” For the first time in four years, the rental market can handle the gradual growth in apartment hunters.
The condominium conversion craze put a significant dent in Orlando’s rental inventory, decreasing the number of available units from 157,000 in September 2004 to a five-year low of 138,242 in September 2006, according to local commercial real estate firm Cushman and Wakefield. According to the firm’s fourth-quarter 2007 multifamily report, the Orlando rental market officially rebounded in 2007 with its first increase in years and has added more than 4,000 units since September 2006. Growth is expected to continue.
There are currently about 4,500 rental units under construction in Central Florida, with an estimated 4,000 scheduled for delivery this year. Demand remains around 5,000 to 5,500 per year but Cushman and Wakefield Senior Director Jay Ballard said Orlando is slowly returning to a healthy balance. Several years ago 10,000 units were under construction per year, but after such a slump, Trainer said this is a relief. “Even the fact that [apartments] are being built makes some people nervous because some areas are still over-saturated,” she said.
“But the sheer cost of construction is stopping builders from overbuilding again. This is a healthy number — slow and steady.” Apartment occupancy has settled to almost normal levels because the area is becoming restocked with available rental units. Condo conversions diluted the rental inventory by about 11 percent, spiking the occupancy rate by 5 percent between 2003 to 2005 to a market record of 96 percent, according Cushman and Wakefield.
Over the last two years that figure has returned to 90 percent, dropping 3 percent just in the last year. According to Apartment Hunters, that figure has lingered around 90 percent as the summer season approaches. The summer is naturally a busy time for apartment complexes. Families are reluctant to disrupt their child’s academic year with a move and college students tend to look for housing near campus in the beginning of summer.
“The rental market is much stronger these days because buying a house is not all that appealing. Many people are gun shy,” Trainer said. In East Orlando the demand for apartment units tends to outweigh the supply because it is home to the University of Central Florida, which enrolled nearly 49,000 last fall. Trainer said if apartment complexes are easily filling units, they might not be as lenient credit-wise as those in other, more saturated markets.
“If they can get a person in there with sparkling credit, that is the person they are going to pick,” she said. “In this market it will still be harder for those with questionable credit.” Rental rates have increased 11 percent in four years from $775 to the current average of $862, Cushman and Wakefield reported.
Trainer said apartments in areas like MetroWest may still be on the low end of the price bracket because that area is still saturated with rental inventory thanks to an overwhelming number of condo conversions there several years ago.
But in places like East Orlando, prices will be higher because supply and demand are more balanced. “Things are not perfect but they never are. The rental market is the healthiest it has been in several years,” Trainer said.
