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Rampant, Increasing Fraud Impacting Rental Housing Costs

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Throughout the country, incidences of rental application, financial and identity fraud are on the rise and fueled by social media. Results from a groundbreaking new survey of rental housing providers have revealed staggering increases of fraud, contributing to both the growth in rents and number of evictions. A vast majority of respondents (70.7%) reported experiencing an increase in fraudulent applications and payments, utilizing fraudulent documentation, financial statements and even identities in the past twelve months. Driven in part by social media platforms such as TikTok and Instagram, the rise in false rental housing applications is exacerbating rental costs, fueling the housing affordability challenges facing communities across the country and undermining the credibility of eviction data. These fraudulent incidents consist of a wide range of wrongdoing, including criminal behavior. One of the most notable findings in the survey was the share of evictions tied to fraudulent applications with respondents reporting that, on average, 23.8% of their eviction filings were linked to fraudulent applications and related failure to pay rent over the past three years. This in turn leads to higher costs for rental housing providers and, ultimately, the renters they house. The average respondent was required to write off nearly $4.2 million in bad debt over the past 12 months. Respondents reported that approximately a quarter (24.5%) of this bad debt, on average, could be attributed to nonpayment of rent due to fraudulent applications. “There has been anecdotal evidence of the rise in fraudulent activity over recent years, but now we have clear evidence of the staggering impact of these crimes on the rental housing market,” said NMHC President Sharon Wilson Géno. “While most renters are honest, those who are not are causing the cost of rental housing to increase for everyone. Additional delays in many jurisdictions in the lease enforcement process, even when there is clear fraud, incentivizes bad actors and means that this illegal behavior costs responsible renters even more. We call on lawmakers and courts to take action that will address this problem.” This new survey of rental housing providers conducted by the National Multifamily Housing Council (NMHC) found that nearly all respondents (93.3%) reported experiencing fraud in the past twelve months. Of those who experienced fraud: Respondents who observed an increase in fraudulent applications and payments reported a 40.4% average increase over the past 12 months. Sixty seven percent of those who experienced an increase in fraudulent applications and payments said that this varied by jurisdiction, and many (46.9%) called out Atlanta specifically as a jurisdiction where increases in fraud were most concentrated. Residents and rental housing providers can learn more about avoiding fraud and scams through this Consumer Financial Protection Bureau resource. The NMHC Pulse Survey on Operational Impact of Rental Application Fraud and Bad Debt was conducted from November 15, 2023, to January 9, 2024, and received responses from NMHC and National Apartment Association (NAA) members representing 75 leading apartment owners, developers and managers. The full survey can be found here. Contacts Colin Dunn202/974-2370cpdunn@nmhc.org

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PetScreening Recognized As A CRE Technology Influencer

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Award from GlobeSt. Honors Company’s Impact on Multifamily Industry  PetScreening, which offers the rental housing industry’s first and leading pet policy management software at no charge to property owners and managers, announced it has been named a 2024 Influencer in Commercial Real Estate Technology by GlobeSt. The awards program recognizes companies and individuals who provide innovative technology applications for property owners and operators in the multifamily, retail, industrial, office, hospitality and healthcare real estate sectors. PetScreening and the additional honorees are profiled in a feature article on GlobeSt.com. “We are truly honored and humbled to receive this award,” said John Bradford, founder and CEO of PetScreening. “It is our company’s mission to provide powerful, yet easy-to-use technology that enables rental housing operators to embrace pet-inclusivity while also efficiently managing risk. This recognition provides yet more evidence that we are succeeding in that mission.” PetScreening’s Influencer status stems in part from its wide reach and impact across the multifamily industry. PetScreening is now serving more than 5 million apartments and rental homes across approximately 23,000 rental communities and properties. Prominent multifamily clients include Greystar, Willow Bridge, Equity Residential and ZRS Management. The company estimates it has helped owners and operators capture more than $72 million in pet-related revenue that otherwise would have been lost. It has generated over 3.5 million user profiles and completed more than 500,000 assistance animal reviews. The Influencer in Commercial Real Estate Technology award adds to a slew of recent honors for PetScreening. In 2023, the company was named the Software Solutions Company of the Year by the NC Tech Association, designated the Landlord/Owner Technology of the Year by the Information Management Network, included in the annual Inc. 5000 ranking for a second straight year and named to the Deloitte Technology Fast 500. In addition, Pat Patterson, PetScreening’s senior director of business development, enterprise, was honored as a Multifamily Influencer by GlobeSt. Real Estate Forum, while Chief Financial Officer Ellen Sondee was anointed CFO of the Year by the Charlotte Business Journal. About PetScreeningOffering the industry’s first and leading pet policy management software, PetScreening™ helps housing providers manage residents’ pets and assistance animals for free while generating opportunities for pet-related revenue. The digital screening platform standardizes risk assessment for household pets by providing a digital Pet Profile and FIDO Score for each pet screened. PetScreening also streamlines the assistance animal accommodation request review process while following HUD guidelines, and it helps limit unauthorized pets. The platform seamlessly integrates with third-party software such as Yardi, OneSite, Entrata, MRI, ResMan, Rent Manager, Appfolio, Buildium and many more. As a fast-growing innovator in the rental housing technology space, PetScreening has received multiple awards and honors in recent years, including recognition from the Inc. 5000, Deloitte’s 2023 Technology Fast 500, the NC TECH Awards and the Charlotte Business Journal’s Fast 50. For more information, visit www.petscreening.com. SOURCE PetScreening.com

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SFR Rent Growth Edges Up in Q4 2023: Is the Slowdown Over?

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Four Out of Six Regions Showed Improved Year-Over-Year Rent Growth in Q4 2023 vs. Q3 2023 Rentometer has released their quarterly Rent Report for Q4 2023. The focus of the quarterly Rent Report is three-bedroom (3-BR) single-family rentals (SFRs). The Q4 2023 report covers 646 cities that had at least 25 data points for Q4 2022 and Q4 2023. Highlights from the report are as follows: Rentometer’s president, Mike Lapsley, commented that “SFR rent growth remains positive for most U.S. cities (82%), however, the rate of growth has slowed significantly in the 2nd half of 2023 in almost every city and in all regions of the U.S.” View the full report to see how rent prices have changed in your market in Q4 2023. About Rentometer, Inc. Rentometer collects, analyzes, and distributes multifamily and single-family rental price data throughout the U.S. Our rental data is proven to be valuable for our diverse customer base of real estate professionals–including real estate investors, property managers, agents, and even renters–as we deliver more than 20,000 reports daily. SOURCE Rentometer, Inc. CONTACT: media@rentometer.com

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HOME EQUITY DOWN SLIGHTLY ACROSS U.S. DURING FOURTH QUARTER BUT REMAINS STRONG

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Equity-Rich Portion of Mortgaged Homes Decreases While Seriously Underwater Level Rises; Overall Equity for Homeowners Also Ticks Downward Amid Decline in Home Values; But Nearly 95 Percent of Mortgaged Homeowners Still Have Equity Built Up ATTOM, a leading curator of land, property, and real estate data, released its fourth-quarter 2023 U.S. Home Equity & Underwater Report, which shows that 46.1 percent of mortgaged residential properties in the United States were considered equity-rich in the fourth quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market values. The portion of mortgaged homes that was equity-rich in the fourth quarter of 2023 decreased from 47.4 percent in the third quarter of 2023, marking the second straight quarterly decline. The latest figure also was down from 48 percent in the fourth quarter of 2022. At the same time, the report shows that the portion of mortgaged homes that were seriously underwater in the U.S. rose slightly in the last few months of 2023, from 2.5 percent to 2.6 percent of all residential mortgages. Seriously underwater mortgages are those with combined estimated balances of loans secured by properties that are at least 25 percent more than those properties’ estimated market values. “There are increasing signs suggesting that the extended period of prosperity in the U.S. housing market may be showing signs of easing,” said Rob Barber, CEO for ATTOM. “It’s not as if there are big warning signs flashing. Similar things were happening early last year before the market surged in the Spring. But the softening of equity follows a dip in resale profits last year for the first time in more than a decade as prices have stopped soaring through the roof. This year’s peak buying season will tell us a lot about whether things really have settled down long-term.” The fourth quarter price decline capped off a year when the median home price grew annually by just 2 percent, marking the weakest growth since 2012 when the U.S. housing market was just starting to recover from the aftermath of the Great Recession that hit in the late 2000s. Prices grew at only a modest pace in 2023 amid a mixed scenario of rising mortgage rates that offset upward pressure from a tight supply of homes for sale, strong employment and a rising investment market. The potential for more uneven equity trends remains in place as the housing market heads into its annual peak Spring and Summer buying season but faces elevated prices that remain a financial stretch for wide swaths of the potential buying public. Equity-rich share of mortgages drops in most states The portion of mortgages that were equity-rich decreased in 41 of the 50 U.S. states from the third quarter of 2023 to the fourth quarter of 2023, commonly by one to three percentage points. The biggest declines came in the Midwest and West regions, led by Missouri (portion of mortgages homes considered equity-rich decreased from 41.9 percent in the third quarter of 2023 to 37.3 percent in the fourth quarter of 2023), Minnesota (down from 39.5 percent to 35.9 percent), Michigan (down from 48.5 percent to 45.1 percent), Washington (down from 56.7 percent to 53.5 percent) and Utah (down from 56.8 percent to 53.7 percent). At the other end of the scale, equity-rich levels rose in just nine states from the third quarter to the fourth quarter of last year, with the largest improvements concentrated in the Northeast region. The biggest increases were in Vermont (up from 79.8 percent to 82.8 percent), West Virginia (up from 30.5 percent to 32 percent), Wyoming (up from 39.9 percent to 41.2 percent), New Jersey (up from 45.9 percent to 46.8 percent) and Connecticut (up from 41.5 percent to 42.4 percent). Seriously underwater mortgage levels up slightly in most states The portion of mortgaged homes considered seriously underwater rose nationwide from one in 40 during the third quarter of 2023 to one in 38 during the fourth quarter. The ratio went up in 42 states, mostly by less than one percentage point. The biggest increases were clustered in the Midwest and South, regions that already had some of the nation’s highest levels of seriously underwater mortgages. The largest quarterly increases were in Wyoming (share of mortgaged homes that were seriously underwater up from 5.9 percent in the third quarter of 2023 to 8.8 percent in the fourth quarter of 2023), Missouri (up from 3.9 percent to 5.6 percent), Oklahoma (up from 4.6 percent to 5.5 percent), North Dakota (up from 4.6 percent to 5.2 percent) and Illinois (up from 4.4 percent to 5.1 percent). On the flip side, states where the percentage of seriously underwater homes decreased the most from the third to the fourth quarter of last year were Idaho (down from 2.7 percent to 2.3 percent), California (down from 1.6 percent to 1.3 percent), West Virginia (down from 4.6 percent to 4.4 percent), Texas (down from 2.4 percent to 2.2 percent) and Vermont (down from 0.9 percent to 0.7 percent). Highest levels of equity-rich homeowners still in Northeast and West Nine of the 10 states with the highest levels of equity-rich mortgaged properties around the U.S. during the fourth quarter of 2023 were in the Northeast or West regions. Those with the largest portions were Vermont (82.8 percent of mortgaged homes were equity-rich), Maine (60 percent), California (58.2 percent), New Hampshire (58 percent) Idaho (57.6 percent). Nine of the 10 states with the lowest percentages of equity-rich properties during the fourth quarter of 2023 were in the Midwest or South. The smallest portions were in Louisiana (19.7 percent of mortgaged homes were equity-rich), Illinois (28 percent), Alaska (29.2 percent), Oklahoma (30 percent) and Maryland (30.2 percent). Among 107 metropolitan statistical areas around the nation with a population of at least 500,000, the West and South again dominated the list of places with the highest portion of mortgaged properties that were equity-rich. All but four of the top 25

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Homebuyers on a $3,000 Monthly Budget Have Gained $40,000 in Purchasing Power Since Mortgage Rates Peaked Last Fall

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Redfin reports buyers can afford a more expensive home now that mortgage rates have dropped to 6.7%, down from nearly 8% in October A homebuyer on a $3,000 monthly budget has gained nearly $40,000 in purchasing power since mortgage rates peaked this past fall, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. A $3,000 monthly budget will buy a $453,000 home with a 6.7% mortgage rate, roughly this week’s average. That’s compared to the $416,000 home the same buyer could have purchased in October with an average rate of 7.8%. To look at affordability from another perspective, the monthly mortgage payment on the typical U.S. home, which costs roughly $363,000, is $2,545 with a 6.7% rate. The monthly payment was nearly $200 higher— $2,713— when rates were at 7.8%. Homebuyers are getting some relief in 2024 as mortgage rates come down from the two-decade high they hit this past October. Weekly average rates dipped into the 6.6% range by the end of 2023, and ticked up slightly to 6.7% this week. While that’s double the record-low 3% rates buyers scored during the pandemic, Redfin agents report that buyers have come to terms with the 6% range— but they were more hesitant when they were approaching 8%. “Bidding wars are picking up as mortgage rates decline and inventory stays low. I’ve seen a few homes get 15-plus offers recently, and one got more than 30,” said Shoshana Godwin, a Redfin Premier agent in Seattle. “Late last year, many listings sat on the market as buyers sat on the sidelines, hoping for rates to drop. Now, buyers are snapping up homes because even though rates haven’t plummeted, people are realizing that the longer they wait to buy a home, the more competition they’re likely to face.” Mortgage rates likely to stay in the 6’s for the foreseeable future Redfin economists predict mortgage rates will end the year lower than they started, but the path is likely to be bumpy. Redfin is keeping an eye on next week’s Fed meeting to provide more clues on how soon they will cut interest rates: It could be as soon as March, but it’s likely to be later. Mortgage rates should come down a little— but not a lot— when interest rates are cut. “My advice to serious house hunters: Trying to time the market around mortgage rates is probably a waste of energy, as affordability is unlikely to change meaningfully in the next several months,” said Redfin Chief Economist Daryl Fairweather. “Instead, buyers should consider their own personal and financial circumstances: What matters most is whether the home meets your needs long term and whether you can afford it. Timing the market mattered in 2021, when we were in a golden window of record-low rates— but that window is closed.” To view the full report please visit: https://www.redfin.com/news/purchasing-power-improves

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Price Growth Starts the Year Strong But Harsh Weather Freezes Out Some Would-Be Homebuyers

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Redfin agents in areas affected by inclement weather report slow homebuying activity, but agents in warmer locales say buyers and sellers are active as mortgage rates stay in the high-6% range, down from 8% a few months ago The median U.S. home-sale price rose 5.1% during the four weeks ending January 21, the biggest increase since October 2022, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. Asking prices rose 6.5% which is also the biggest increase since October 2022. Prices are rising for a few reasons. One, inventory is still quite low. The total number of homes for sale is down 4% year over year. And while new listings are up 2%, that’s the smallest annual increase in two months. Additionally, sellers can command higher prices because buyers have more purchasing power; mortgage rates are holding steady in the mid-to-high 6% range, down from 8% in October. This week’s sales data shows sluggish activity as severe winter weather kept buyers and sellers on the sidelines in much of the country: Pending home sales are down 8% year over year, the biggest decline in four months. The big annual drop in pending sales can also be explained in part by a base effect from last January: Pending sales were improving at this time last year as mortgage rates fell. While Redfin agents in places that are facing harsh weather report that would-be buyers are staying home (for now), mortgage-purchase applications are rising, and agents in warmer places say demand is picking up: Leading indicators Indicators of homebuying demand and activity   Value (if applicable) Recent change Year-over-year change Source Daily average 30-year fixed mortgage rate 6.95% (Jan. 24) Up slightly from a week earlier Up from 6.18% Mortgage News Daily Weekly average 30-year fixed mortgage rate 6.6% (week ending Jan. 18) Lowest level since May Up from 6.15% Freddie Mac Mortgage-purchase applications (seasonally adjusted)   Up 8% from a week earlier; up 17% from a month earlier (as of week ending Jan. 19) Down 18% Mortgage Bankers Association Redfin Homebuyer Demand Index (seasonally adjusted)   Down 8% from a month earlier (as of week ending Jan. 21) Down 21% Redfin Homebuyer Demand Index, a measure of requests for tours and other homebuying services from Redfin agents Google searches for “home for sale”   Up 18% from a month earlier (as of Jan. 20) Down 15% Google Trends To view the full report, including charts, please visit:https://www.redfin.com/news/housing-market-update-prices-rise-pending-sales-fall

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