By Teke Wiggin
After splitting from her husband, Tami Wingfield couldn’t afford to keep up with the mortgage on the home that they had shared. The monthly $1,600 bill was too much for her to bear alone, and in 2008, she lost the house to foreclosure.
Like many people who lost their homes in the housing collapse, Wingfield decided the next logical step was to rent. But that didn’t mean she had to give up the lifestyle of a homeowner. Wingfield and her three children have managed to stay in a four-bedroom single-family house all to themselves – they just don’t own it.
They’re part of a new class of American renters that has emerged in the wake of the housing bust: people who lost the houses they owned and are now renting single-family homes. Ironically, many of these rental homes are a reflection of the troubles that once plagued the renters. They used to be owned by other families who lost them in the downturn. Now they’re owned and rented out by investors who purchased them at a discount.
At least 1.75 million renters in the U.S. have gone down the same path as Wingfield, according to data from analytics firm CoreLogic.
Wingfield rents her $1,000-a-month home in Goodyear, Ariz., from The Empire Group, a development and investment firm that bought it as a foreclosure. She has a backyard where she’s planted a garden, and she’s on a desirable suburban street lined with quaint homes just eight miles from the house that she owned with her husband.
It’s as if hardly anything has changed.
Feeling Part of the Community
“I am able to provide my daughters and myself a nice home,” Wingfield said. “I don’t have to find a parking spot when I come home, tired from working double shifts at the hospital. I pull my car into the garage and walk into my house.”
Being able to maintain a homeowner’s lifestyle, even as a renter, has also helped her continue to feel like a part of her community.
“You can establish a place in the neighborhood — get a school for your children,” Wingfield said. “The buses run in the neighborhood…. There’s parks and sidewalks to walk your dog.”
Empire, which owns about 1,000 homes in the Phoenix area, spends close to $7,000 a pop to restore each of the distressed properties that it purchases. Its average rental home is 2,100 square feet and goes for $1,050 a month, said Geoffrey Jacobs, a principal at the company.
Jacobs said Empire, which started off as a developer, “put on the investor hat” in 2009. “It was an opportunity for us to take advantage of something we never thought we’d see again,” he said.
Investors provide the capital that Empire needs to convert homes into rentals, and the company turns a profit by taking a cut of the monthly rents that it collects and distributes to investors.
Empire is just one of many firms that are snapping up bargain homes and leasing them to families like Wingfield’s. And with rental rates soaring nationwide, the business strategy is currently lucrative.
As of January, investors are raking in an average 8.6 percent return on their investments annually, according to CoreLogic. That’s a 3 percent increase from 2006. And there are 21 million units in the country’s single-family rental inventory, putting the size of the market at a whopping $3 trillion, CoreLogic said.
That might be a good thing, since millions more borrowers are headed toward foreclosure and may flood the rental market. If that happens, it could continue to push up rental prices and lure more investors into the market, experts have said.
‘Conscientious People’ Coming Out of a Crisis
Many of these single-family renters are like Jacobs’ tenants, whom, he said, are “fairly conscientious people that just went through a foreclosure crisis” and want to retain some semblance of homeownership.
People like Michael Williams, who lives in Memphis, Tenn. When he couldn’t find enough work, he was forced to sell his home in a short sale in 2011 for $110,000 — nearly $40,000 less than he owed on his mortgage. Now he lives in a single-family rental, which costs him $1,025 a month. He said that he feels “blessed” to still be able to reside in a home of his own close to his old neighborhood.
“I’m partial to a home,” he said. “I have my own privacy, and [I also] have grandkids.”
rental housing foreclosed familiesWilliams rents from Memphis Invest, an “REO-to-rental company” that purchases homes in Dallas, Memphis and Phoenix and flips them to “mom-and-pop” investors. REO is real estate parlance for bank-owned properties.
“They’re looking for stability and still have pride of ownership,” said Chris Clothier, a partner with Memphis Invest, of its tenants.
But will these homeowners-turned-renters ever return to homeownership? One possible way back in is through landlords selling their tenants the homes that they occupy. Williams said that his lease agreement stipulates that he could purchase the home he’s living in if his credit score improves and he saves enough for a down payment.
HomeVestors WFI in Stafford, Texas, which manages about 600 rental properties, said it also may offer tenants the opportunity to buy the homes that they occupy.
“We would either sell that home to them or help them how we can,” said Rickey Williams, president of HomeVestors.
In fact, renters of single-family homes may need to be in the position to buy again — and soon. With home prices on the rise, many investors may want to sell, said Jed Kolko, chief economist at listing service Trulia. So if the renters aren’t ready to buy — and recently foreclosed-on homeowners may not be — they’ll have to move.
Still, the boost in the single-family rental inventory has been a positive force, experts have said. They not only offer comfort to once-beleaguered families, but they help to stabilize the housing market by chipping away at the foreclosure inventory.
“It is a good thing for people who need homes to be in homes that need people,” Kolko said.