Landlords find deals in housing crisis

By Nick Carey

LOMBARD, Illinois (Reuters) - The housing crisis and credit crunch may end the American dream of property ownership for millions of people, but for landlords seeking bargain investment properties the market is looking up.

"There will be a lot of product hitting the street in the coming months and it should be pretty cheap," said Mike Bacza, watching the bidding at a foreclosure auction last month in this western suburb of Chicago. "This year I expect I'll buy at least two multi-family units in a decent neighborhood."

The 48-year-old union carpenter is not ready to purchase today, but observes from the back of a large conference hall crowded where hundreds of people -- most of them investors -- are looking to snap up one of some 170 foreclosed homes.

"I'm on a reconnaissance mission," Bacza said, jotting down bids. "I want to know what's selling and for how much."

Building contractor Chad Blankenbaker seeks foreclosed homes to "flip" -- buying at well below market value, refitting then selling them at a hefty profit. "I'm shocked at how low the prices are here," he said. "There's so much inventory that no one has to fight to buy anything."

Around the country the housing crisis represents both a business opportunity for landlords and a huge shift in the rental market.

During the property boom, mortgage rates were low and people could buy a home with little or no money down, so there was no incentive for many Americans to rent.

"The U.S. rental market was nearly flat between 2000 and 2005," said Ken Fears, an economist at the National Association of Realtors. "Some landlords were so desperate to get tenants that we saw cases where they would offer three months free rent and other promotions to fill vacancies."

"Now mortgage rates have risen and it's harder to gain access to credit, allowing landlords to jack up rents for the first time in years," he added.

What is good news for small-time landlords, however, may not be good for publicly traded U.S. real estate investment trusts as the extra supply is expected to push prices down.

Some real estate analysts also worry that many landlords will turn their units into government-subsidized rental housing and stifle the rebirth of some U.S. inner city areas.

BARGAIN BASEMENT

For many people, the housing market is all bad news now.

The Mortgage Bankers Association (MBA) said on March 6 that in the fourth quarter of 2007 a record 0.83 percent of U.S. home loans entered the foreclosure process. The U.S. mortgage delinquency rate of 5.82 percent was the highest since 1985, the MBA said. Officials added that they didn't expect foreclosures to peak until mid- to late 2008.

Dave Webb, principal of Texas-based firm Hudson & Marshall, which held the auction in Lombard on behalf of lenders, said he expects business will be brisk all year, nationwide.