Single-Family Rental Boom Lowered Annual Home Sales by 270,000 Homes

The number of single-family homes that are rented grew by more than 5 million between 2006 and 2017

- Across the United States, starter homes are slightly more likely than more valuable homes are to be rented out.

- After steadily increasing over the past decade, the share of single-family homes that are rented edged slightly lower to 18.9 percent in early 2017, down from a high of 19.2 in 2016.

- Rental houses purchased in recent years are more likely to be affordable starter homes than those purchased before 2006.

News provided by

Zillow

Dec 13, 2017, 07:00 ET

SEATTLE, Dec. 13, 2017 /PRNewswire/ -- A boom in single-family rentals contributed to a crunch in affordable inventory, limiting options for lower- and middle-income buyers. The number of single-family homes that are rented grew by 5 million between 2006 and early 2017, and these homes tend to skew toward the less expensive end of the housing market.

In total, about 270,000 fewer homes are sold each year compared to 2006, or about 5 percent of the homes that would sell in a typical year, according to a new Zillow® analysis. About 120,000 of these lost sales were among the most affordable homes that are often sought by first-time buyers.

As owners lost their homes to foreclosure following the housing crisis, the renter population grew rapidlyⁱ -- the share of single-family homes being rented out jumped from about 13 percent in 2007 to a high of 19.2 percent in 2016. Demand for single-family rentals remains strong -- 45 percent of renters would like to rent one, but only 28 percent can actually find a single-family home to rentⁱⁱ.

"For the past 10 years, the number of single-family homes that are rented has grown steadily and remains near the highest levels ever recorded," said Zillow senior economist Aaron Terrazas. "The combination of foreclosures and growing rental demand following the housing crash was an attractive opportunity for investors – large and small – who were able to buy foreclosed homes and use them to meet the rental demand. At the same time, many long-time owners have opted to hold onto their homes as rentals even after they decide to move somewhere else. With such a large portion of single-family homes being rented out, and with new homes being built more slowly than the market needs, home values will continue to rise, particularly among the most affordable homes with the highest demand."

Millennials are the largest group of buyers in the housing market, driving up competition for less expensive, entry-level homes. But over the past five years, the homes being bought and converted to rentals are increasingly the same affordable starter homes that first-time buyers are after, limiting buyers' options and increasing competition. Almost 40 percent of rented single-family homes bought since 2012 are among the most affordable, compared to 34 percent of single-family rental homes that were bought before the housing market crash.

Across the country, 37 percent of rented single-family homes are among the least valuable in their housing markets. In Detroit, Cleveland, and St. Louis, more than half of the homes being rented are among the least valuable in the area. In other markets, such as Boston, San Jose and Seattle, upward of 40 percent of single-family rentals are among the priciest third of homes in those communities.

Metropolitan Area	Share of Single-Family Homes that are Rented, 2016ⁱⁱⁱ	Share of Single-Family Rentals in the Least Valuable Third of the Market	Share of Single-Family Rentals in the Middle Third of the Market	Share of Single-Family Rentals in the Most Valuable Third of the Market
United States	19.2%	37.2%	36.0%	26.8%
New York/Northern New Jersey	11.3%	43.3%	27.5%	29.2%
Los Angeles-Long Beach-Anaheim, CA	24.6%	29.0%	35.2%	35.8%
Chicago, IL	12.5%	47.0%	29.2%	23.8%
Dallas-Fort Worth, TX	16.4%	34.4%	43.2%	22.4%
Philadelphia, PA	14.8%	46.7%	34.4%	18.9%
Houston, TX	16.1%	36.4%	37.5%	26.1%
Washington, DC	14.8%	24.0%	36.2%	39.8%
Miami-Fort Lauderdale, FL	20.5%	29.7%	35.0%	35.3%
Atlanta, GA	19.8%	39.5%	35.4%	25.2%
Boston, MA	8.2%	21.8%	25.3%	52.9%
San Francisco, CA	20.8%	33.2%	33.4%	33.4%
Detroit, MI	17.1%	59.3%	28.0%	12.7%
Riverside, CA	24.7%	33.8%	33.4%	32.8%
Phoenix, AZ	20.8%	34.7%	42.1%	23.1%
Seattle, WA	16.6%	31.7%	27.7%	40.6%
Minneapolis-St Paul, MN	10.2%	45.5%	29.3%	25.2%
San Diego, CA	25.1%	27.1%	36.1%	36.8%
St. Louis, MO	14.3%	52.6%	30.8%	16.6%
Tampa, FL	18.2%	42.3%	32.9%	24.9%
Baltimore, MD	17.0%	43.8%	35.6%	20.6%
Denver, CO	15.0%	30.2%	38.3%	31.4%
Pittsburgh, PA	13.3%	46.0%	28.3%	25.7%
Portland, OR	16.5%	34.0%	35.9%	30.2%
Charlotte, NC	18.2%	29.0%	40.3%	30.7%
Sacramento, CA	23.3%	34.3%	39.6%	26.2%
San Antonio, TX	18.2%	25.4%	50.1%	24.5%
Orlando, FL	21.2%	32.4%	38.4%	29.2%
Cincinnati, OH	14.5%	48.2%	30.0%	21.8%
Cleveland, OH	14.8%	55.4%	29.2%	15.4%
Kansas City, MO	18.3%	NA	NA	NA
Las Vegas, NV	27.5%	33.7%	41.9%	24.4%
Columbus, OH	18.1%	43.9%	33.6%	22.5%
Indianapolis, IN	17.8%	NA	NA	NA
San Jose, CA	19.6%	23.3%	35.6%	41.2%
Austin, TX	18.2%	32.7%	36.1%	31.2%

Zillow
Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.

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ⁱ Zillow analysis of data from the U.S. Census Bureau's Current Population Survey, Annual Socio-Economic Supplement, March 1979 to March 2017.

ⁱⁱ Zillow Group Report on Consumer Housing Trends, 2017

ⁱⁱⁱ U.S. data from U.S. Census Bureau Current Population Survey, all metro-level data from American Community Survey

SOURCE Zillow