The CRE Crisis Hits Home for Renters

The AP has a story up today about the impact of the CRE crisis on apartment complexes. They note that the number of multifamily mortgages in foreclosure is up 1800% over the past two years. With mortgages on the complexes sinking underwater, owners are just up and walking away.

There was no heat or hot water, so for weeks Mary Fountain would fill a bowl and put it in the microwave, then strip off her extra layers to sponge herself clean.

Upstairs, her longtime neighbor, 70-year-old Gearaldine Davis, peers skeptically out at her balcony, hesitant to step onto the cracked concrete. The last time the city inspector came by, he told her he was afraid to walk out there.

This Bronx apartment building, where city housing violations have increased from 82 to nearly 600 in 16 months, is among thousands of rental properties from Los Angeles to Harlem showing a creeping decay as housing values collapse and funds for repairs dry up.

As landlords find themselves owing more than their properties are worth, some have simply walked away, leaving garbage to pile up. Others have disappeared into bankruptcy, with unpaid utility bills. Some have tried to reduce their losses by neglecting basic maintenance.

How long can this go on? What happens when suddenly apartment complexes have no owner because they've walked away? In 2005, there were 24.5 million apartment units in the US, which means that the current foreclosure rate is something like 1.4%. All that it takes is one abandoned home turning into a crack house to pull down an entire neighborhood. Imagine how much fun it will be when it's not a single house, but a 100 unit apartment complex that we are talking about.

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oh, oh, this isn't good

First thing I've heard really mentioned on the fact these foreclosed multi-rental units (apartments) are people's homes, they are living there and what this is going to do.

Welcome to the 3rd world? Sure seems more and more when it comes to the people, from employment to benefits to food to housing/shelter, they are almost an afterthought!

It is already happening.

Owners of smaller apartment units - 2 to 4 units are abandoning the apartments in urban areas and its not a good picture. It's just a matter of time until the trend moves up the ladder.

WTF, can we get some real stimulus and be done with this bullshit already - even the weakest, poorly designed stimulus has had a small positive impact on economy - imagine a stimulus that actually focused on full employment would do. That would have a real positive impact on the mortgage crisis. - Financial Information for the Rest of Us.

Sure is happening....

I just recently moved out of the apartment building I lived in for 18 months after becoming fed up with the owners inability to keep up with the building maintenance, namely getting the passenger elevator running which had been down at the time I left for a year and a half.

I lived on the 6th floor and the walking up and down flights of stairs had gone beyond ridiculous.

Before finishing my move out I was speaking with the on-site manager of the place and he informed me of getting notices each month from the utilities to cut off the entire building. This is a 70 unit building with at least $1,000 a month rents located downtown in a large US city. It isn't an upper/lower located out in the city limits.

I think things are about to start getting interesting (unfortunately).