The housing downturn is finally bringing pain to apartment owners.
In recent years, sky-high home prices followed by a wave of foreclosures helped fill rental apartments and buoyed the real-estate investment trusts that own them. But earnings out Friday morning from Apartment Investment & Management Co., the largest publicly traded U.S. apartment owner, could show that rental apartments can no longer escape housing woes.
Already, the credit crunch has triggered write-downs as REITs freeze new developments. Last week, Aimco said it would take an $107 million charge related to falling land values in California, becoming one of several apartment REITs to take a write-down. The Denver-based REIT also said it would pay 71% of its fourth-quarter dividend in stock to conserve cash. Two apartment REITs have pared their dividends.
The housing bust has shattered the psyche of would-be buyers. But home prices are down so far in some markets that it is now cheaper to buy than to rent, though tighter credit has sidelined buyers. Meanwhile, job losses are highest among the age cohort most likely to rent, 20- to 34-year-olds.
Congress is considering a raft of goodies for potential home buyers, including a $15,000 tax credit and federally subsidized 4% mortgage rates. And an effort to allow bankruptcy judges to write down mortgages for struggling homeowners could keep would-be tenants from becoming renters.
—Nick Timiraos--- WSJ.com
