Tough housing markets may be brewing for both renters and buyers in some regions as the nation's economy recovers from recession.

One recent report contains forecasts that suggest renters in some markets ought to consider locking in long-term leases to avoid higher rents.

Another report suggests that potential home buyers with border-line credit reports should either tighten up their credit or buy sooner than planned to avoid the possibility of tighter credit and higher prices.

Carrollton, TX-based apartment market researcher M/PF Research says once the U.S. economy registers more momentum, apartment markets most likely to boom are concentrated in Florida, California and Texas.

California's "Inland Empire," (Riverside-San Bernardino), Florida's Broward County (most notably Pembroke Pines/Miramar and Pompano/Deerfield Beach communities) and Tampa Bay, and the Dallas/Fort Worth and Houston areas all have long-term histories of solid job growth, suggesting the potential for near-term employment expansion that could spur household formation and, in turn, apartment demand, M/PF says.

Most of the areas also saw apartment deliveries peak at the same time that job growth was at a high point in 1999-2000. The volume of new supply coming on line exceeds the demand which is keeping rents down -- for now.

California's Oakland-East San Francisco Bay Area region, hit hard recently by the downturn in the high-tech industry, could be a surprise "dark house" recovering sooner than expected, M/PF also said.

"It appears likely to pull out of its slump faster than struggling neighbors, San Jose and San Francisco," which saw rents plummet by double digits in 2001, M/PF said.

Tighter credit coming?

Home buyers in other markets should be on the lookout for credit tightening after recent trends in subprime lending, higher loan-to-value ratios and other riskier lending habits could leave lenders vulnerable to a greater number of delinquencies and defaults, according to Federal Deposit Insurance Corporation.

"An estimated $2 trillion in (non-construction) mortgage debt, approximately one-third of the total outstanding, was underwritten during 2001," reports FDIC.

"The level of credit risk, however, may be higher this time around because the mortgage lending business has changed since the last downturn...including increased involvement by insured institutions in the higher-risk subprime credit market, the acceptance of higher initial leverage on home purchases, and greater use of automated underwriting and collateral valuation processes, which have not been recession-tested," FDIC reported.

The incidence of riskier lending is most evident in Atlanta, Boston, Chicago, Dallas, Kansas City, Memphis, New York and San Francisco.

"The level of risk appears modest, however, insured institutions with significant C&D (construction and development) loan exposures in markets that experienced ongoing residential construction during 2001, despite slowing local economies, are at higher risk. Weakening home prices could hurt loan quality in selected markets. The San Francisco Bay area stands out as a place to watch in this regard," FDIC reported.

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Published: April 12, 2002

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.