Troubled Homeowners Need a Matchmaker

With millions of American families facing eviction, the housing market has also caused home equity, the largest source of most Americans' wealth, to disappear seemingly overnight. This new crop of homeowner-turned-renter has entered the market, leading to an inversion of the housing and renters' market. Matching families struggling to keep a roof over their heads with homeowners trying to preserve their home equity will help not just the housing market, but real people weather these truly trying times.

Homeownership is on Mars, Renting is on Venus
As the housing market continues to resemble the cold, inhospitable atmosphere of the Red Planet, renting is showing a proportionally heated demand. In 2005, during the height of the housing boom, condo conversion outstripped apartment construction, according to the U.S. Apartment Market Report. Soon enough, vacancy rates started to trend downward. Meanwhile, with the recent crop of displaced homeowners, rent prices started to climb. According to the National Association of Realtors, the average rent showed a 3.1 percent increase in 2007 and is expected to jump an even greater 5.3 percent in 2008. Some cities are showing a double-digit jump in rents. In these divergent markets, evicted homeowners are experiencing a double-whammy. Not only have they lost their homes, they're paying more for rent.

Using the Classifieds: The Desperate and the Available
Although few people are talking about them, there is also another type of homeowner who's facing a difficult situation with the current housing market. Many people who can still pay the mortgage wish they can sell their homes. Maybe they've been planning to move into a bigger home. Maybe they've gotten a better job offer in another city. If they sell their home now, they're likely to take a loss or dramatically reduce the return on the equity they've built up over the years.

Does this sound like you? You may never have imagined yourself as a landlord, but you may be able to turn your current home into a property investment. Using your current equity to finance your new home mortgage, you can lease your old home and use the revenue from the rent to wait out the depressed housing market. At the same time, you're buying a new home at the absolute best time to start a new home investment. And, who you might ask, is going to rent your 1,200 sq. ft. 3 bed/2 bath house? The family from across town who got evicted last month.

Not Looking for Commitment, Just some Companionship?
Chances are you yourself were once a renter. Although you may have been a model tenant, you probably know enough about writing rent checks, broken appliances, and plumbing leaks that you're not overly thrilled about "managing" your home. Plus, signing over rights to live in your home for six months, a year, or longer makes you understandably nervous, especially if you have another mortgage on a separate house. One solution to minimize your risk and your commitment is to rent your house on a month-to-month basis. In fact, there is nothing to stop you from renting out your home and—as long as you don't expect a miracle—putting it on the market at the same time.

Relationships Take Work: Don't Ignore Improvements
Depending on the condition of your home, it may make a lot of sense to complete some home improvement projects while you're renting. You might consider offering lower rent in exchange for accommodations in having workers come in and complete improvements. Better yet, you might offer lower rent and seek out a tenant with handyman skills. According to the Bureau of Labor Statistics, the U.S. economy shed 90,000 manufacturing jobs in October and 49,000 construction jobs. That's quite a few people who might be looking for a deal on rent with some form of handy skills.

Stop Playing the Field and Settle Down!
For all the homeowner-turned-renters, there are also a growing number of renter-turned-homeowners. After all, many people getting eviction notices aren't the ones on the mortgage, but are renters from landlords who can no longer pay the mortgage on the property. Makes you wonder where that rent money is going, huh? Instead of finding a new house to rent, you might talk to the real owner of your house—the bank. Providing evidence that you've never been late on rent looks good to more than just a new landlord. With property values in the tank, you might just find the rent you've been paying is higher than the corresponding mortgage on the home. As scary as it sounds, there is no better time than right now to invest in real estate.

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