They’re not alone. Theresa Jackson, who owns JaxSun Realty, received dozens of calls in recent months from homeowners in the exact same bind.
Fortunately, while real estate sales are limping along with Colorado Springs home values at 79 percent of their peak in 2007, the rental market is heating up fast.
Colorado Springs rental vacancies in the first quarter of this year (second quarter figures have been released yet) dropped 15.7 percent year-over-year from 6.9 percent in the first quarter of 2010 to 5.8 percent, the lowest vacancy rates on record for more than a decade, according to the Colorado Division of Housing.
The lack of supply in the rental market is driving up rent. Jackson said she knows people, especially those living downtown, who have experienced incredible rent increases when they went to renew their leases this year, including a $200 jump for one of her clients.
Angela Byrne, who owns and operates Byrne Real Estate and Property Management, had a similar experience.
“Almost every renewal we get, we’re seeing a rent increase,” Byrne said
Rent for her most recent lease renewals is up 6 percent, she said.
All of that has contributed to a strong rental market, where people moving into the community are having trouble finding a suitable rental and are willing to pay more for a good property than they were in the past.
Hank Proburka, a Realtor with the Platinum Group, and other real estate agents say they’ve spent a lot of time working with clients of out-of-state Realtor friends who need a place to rent.
Bobbie Rupp, an agent with Re/Max, said she shows clients properties and can look at 20 houses in day without finding a suitable one.
“When you finally see something worth renting, you have to be quick and get your application in right away,” Rupp said. “It has to be the first day, otherwise someone else will snap it up first.”
While most homeowners who can’t afford to sell because they would lose tens of thousands of dollars are still too upside-down on their properties to fully cover their mortgages, insurance and tax payments with the rent they collect, they’re usually able to get close, Jackson said. And that allows them to go on with their lives without worrying about foreclosure or even having a short sale on their record.
Certain Colorado Springs homeowners have always opted to rent instead of sell, said Proburka. It makes sense for a family early in a military or aerospace career to rent a home out while stationed elsewhere, because the odds are high the family will be stationed in Colorado Springs again.
It also sometimes makes sense in a market like this for a family to rent a home out and buy another if they’re looking to upgrade and want to wait for the market to turn around before they list their old house, Proburka said. Lenders measure debt to income ratios and weigh incoming rent against outgoing payments on a property, he said.
What’s new though is the number of people who would have liked to sell who are now renting instead, Proburka said.
“I’ve experienced a lot of that,” he said. “The reason people are renting instead of selling is that this is the best rental market we’ve seen in this town.”
And it’s a difficult market for sales.
The Hortons are among those caught in the crosshairs. They originally put their house, which they bought about four years ago, on the market in March of 2010 and had no activity for six months, Kristin Horton said. They changed agents and relisted the property in November for $165,000.
“We started high because we figured we could come down,” Horton said.
The house went under contract in the winter for $155,000 and while the buyers were preapproved for a loan, it didn’t go through in the end, Horton said. They put the house back on the market at $155,000 and got a buyer at $152,000. Everything was coming together and they were ready to close just last week.
But the house appraised for $146,000 and the buyer, with a VA loan, wasn’t allowed to buy it for more. The Hortons couldn’t afford to sell it for less. Kristin’s husband is already in Louisiana and she’s headed down next week.
“We have no choice now but to rent it out,” she said. “The one thing I got from this experience — I’ve lost all hope in buying and selling houses. I don’t want to buy again unless I’m sure it’s the house I’m going to die in.”
Rupp said she has helped half a dozen of her clients who originally listed their homes for sale with her find property managers and rent their homes this year.
She said most of her clients in this situation bought at the peak of the market and are over encumbered on their homes. It’s hard for some of the homeowners Jackson works with to trust their houses and investments to strangers.
“That’s where I come in and make them feel a little better about that risk,” Jackson said.