RISMEDIA, Nov. 8, 2007-(MCT)-Will Kirby and his San Diego home emerged unscathed by the California fires. Now the Navy helicopter pilot will see if he fares as smoothly in the Hampton Roads housing market.
He’s rented out his Norfolk house — a four-bedroom, three-bathroom Colonial on Burleigh Avenue near Wards Corner — since he was transferred to California in 2005.
His tenants will move out this month. The place has been listed for nearly three weeks. Kirby has already knocked the rent down $50, to $1,300. He’s braced to go lower. If it stays vacant through winter, “we wouldn’t be eating Ramen noodles,” he said, “but it would definitely put a ding in what we do.”
Kirby has plenty of company these days.
“There are an awful lot more rentals on the market,” said Laura Wenslaff, the principal broker and owner of Home Rental Realty in Virginia Beach, “and they’re not renting as fast as they normally would.”
The local real estate industry has no overall figures, but Realtors confirm a significant upsurge in house rentals. And the “for rent” signs are popping up in upscale neighborhoods, such as Bay Colony and Witchduck Point in Virginia Beach, that usually aren’t fertile field for rentals.
It’s at least partly driven by the sluggish housing market: Some homeowners, looking in vain for buyers for months, switch to renters. Others, seeking to offset their mortgage quickly, go straight for renters until the market rebounds.
“I’ve been in the business for 23 years, and these are the most rental vacancies that I’ve had,” said John Hanson, principal broker of Hanson & Associates Inc. Realtors in Virginia Beach.
At the start of the year, Hanson had three houses for rent; now he has 10. Jan Rucinski, property manager for Hutcheson Realty in Virginia Beach, is looking for renters for 20 properties. Usually, at this time of year, she’s doing so for six or eight.
The rental and sales markets tend to move in opposite directions, Rucinski said. But now she’s finding home rentals are also slow to budge.
“Some of them have been on the market for at least two months,” she said. “A few years ago, I don’t know if we ever ran into the vacancy problem.”
The higher-priced rentals are the toughest to market, said Jackie Ellis Dunbar, an associate broker with Re/Max Allegiance in Virginia Beach. “Over $2,000, it sits and sits and sits,” she said.
Compounding the problem: This time of year, coming close to the holidays, typically is slow in the housing market.
Some homeowners are throwing in lawn and pool maintenance to sweeten the deal for renters, said Tim Gifford, owner of Gifford Management Group in Norfolk.
Others use multiple approaches, said Yaser Jawad, an agent for Long & Foster Realtors in Chesapeake. They might list their houses both for sale and rent — or they might offer renters an option to buy the home within a year.
Longtime owners often are recouping their mortgage payments with their rental incomes, Gifford said. Recent buyers, though, have to settle for less. Now he’s advising owners to avoid the temptation of raising rents when a vacancy occurs.
Kirby’s previous tenant was paying $1,300. This time, he started at $1,350, but soon went down to $1,300. He’s open to going lower if he doesn’t find any takers soon.
He considers $1,300 his break-even point. But Kirby figures it would be less costly to reduce the rent than to have the house sitting empty for months.
Marie Carr has kept the rent stable — $1,100 — on her mother’s three-bedroom house in the Oceana Gardens section in Virginia Beach. Carr’s mother, who bought it in 1998, has since moved to Long Island, N.Y., but has kept the house. It’s been listed for about a week.
Horror stories about the housing market notwithstanding, Carr is confident of finding a renter soon. “With all of the foreclosures and the market going crazy, people can only rent now,” she said. Plus, “as long as the military is here, I don’t think we’ll have a problem.”
Even before the housing slowdown, military families fueled both sides of the local rental market — as renters and as homeowners renting out their properties.
Kirby has no thoughts of selling his Norfolk house: He sees it as a long-term investment, and there’s a “great chance” he could return to the area.
Martin Levering, a retired Navy lieutenant commander, used to rent. Now, Levering is a defense contractor and owns a home in the Pines of Warrick area of Chesapeake. A house down the block just went up for rent — an unusual occurrence. It also has a “for sale” sign in front.
The rental possibility, Levering said, hasn’t gotten him or his neighbors worried: “It’s a good neighborhood, very steady, and I would like to think they’re fairly discriminate in who they’re going to rent to.”
Of course, Realtors acknowledge “for rent” signs can cause fears that an area is going downhill.
“My philosophy has always been: Good landlords make good neighbors,” said Chandler Scarborough, owner of Chandler Scarborough Realty in Virginia Beach. “If the owners are careful about screening their tenants and managing their properties, the tenants can be just as good as property owners.”
To Paul Bishop, managing director of research for the National Association of Realtors in Washington, the boom in renting can be “a good thing from the consumers’ perspective, looking for affordable rentals.”
And it may not be so bad for the renters themselves, said Old Dominion University’s recently released State of the Region report.
“Over the past few years,” the study said, “it has become relatively more attractive for households to rent rather than to own in Hampton Roads.”
The study compared the principal-and-interest payment for a median-priced local house with the rent for a three-bedroom house. The ratio rose from 0.97 in 2000 to 1.25 last year, meaning the house payment now exceeds the rental average.
The report did not take into account the tax benefits of home ownership, such as mortgage interest deductions, because that would have been too difficult to pin down, said James Koch, the ODU economist who edits the report. “The major point,” he said, “is that the ratio has been changing in favor of renting.” Realtors, however, say the financial edge rests squarely with homeowners.
“When you’re renting, you’re paying someone else’s mortgage,” Rucinski said. “When you’re owning, you’re putting equity into your property.
“If you are going to be here more than a year,” she said, “I would say it’s more beneficial to own something.”
Copyright © 2007, The Virginian-Pilot, Norfolk, Va.
Distributed by McClatchy-Tribune Information Services.