Investors Realizing Those That Cant Buy RENT

By Janet Morrissey

May 5, 2008

One investors nightmare is another investors dream.

Home sweet home?

As the credit crunch deepens, mortgage defaults climb and the housing market turmoil shows no signs of letting up, rental apartment building owners are smiling.

Many of the issues that are decimating the housing sector are the same ones that are breathing life and new demand into the rental market, in particular, apartment real estate investment trusts.

The result is that investors are seeing opportunity on the rental rather than the homeownership side.

"People are working, and they need places to live; if they can't buy, they'll rent," said Michael Cuggino, president and portfolio manager of the Permanent Portfolio Fund in San Francisco, which holds shares in a number of apartment REITs. "That's favorable for apartment REIT business conditions."

Demand varies from market to market, however, depending on supply and unemployment levels, Mr. Cuggino said.

Gone are the heady days when cheap, easy capital caused a huge flow of renters to stampede into the homeownership market. Most are now content to sit in their rental apartments until the turmoil in the housing market passes or at least bottoms out.

"Existing tenants are happy to sit on the sidelines while the housing market continues to tumble," said David Harris, an analyst with Lehman Brothers Holdings Inc. of New York.

At the same time, rental apartment building owners are rolling out the welcome mat for housing re-fugees who were booted out of their homes after defaulting on their mortgages amid the credit crunch and the crumbling economy.

RENTING, NOT BUYING
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