As mortgage rates remain stubbornly high and home affordability out of reach for many buyers, a new type of rental competition is emerging in some of the country’s hottest housing markets.
“Worsening for-sale supply-demand conditions are creating new institutional competitors: accidental landlords,” notes a recent report by Parcl Labs.
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These ‘accidental landlords' are homeowners who tried to sell but couldn’t fetch the price they wanted — and instead have decided to rent out their homes until conditions improve.
“When these home sellers cannot find buyers, they face three choices: delist and wait, cut price to find market clearing level, or convert to rental. The last option creates what Parcl Labs terms ‘accidental landlords': owners who enter the single-family rental market not by design but by necessity,” the Parcl Labs researchers wrote.
It’s a growing trend that may be quietly disrupting the single-family rental market and putting pressure on big institutional landlords like Invitation Homes, American Homes 4 Rent and Progress Residential.
The phenomenon is most concentrated in the same metros where institutional landlords have historically built up large portfolios: Atlanta, Dallas, Houston, Phoenix, Tampa and Charlotte. According to Parcl Labs, those six cities represent 36.8% of all institutional single-family rental holdings nationwide.
But these same cities are now seeing home listings pile up, leading to a surge in homeowners pulling their listings and turning them into rentals instead.
Houston and Dallas saw the biggest increases in homes that failed to sell and were converted into rentals, followed by Tampa, Phoenix and Atlanta. Charlotte, an outlier, actually had a modest decline in the number of homes that failed to sell.
Meanwhile, single-family inventory is up sharply too year-over-year, averaging a 32% increase in those key cities.
This trend is part of a broader reshuffling of the U.S. housing market, where fewer people are able or willing to sell due to high mortgage rates.
Many owners who bought or refinanced during the pandemic at sub-4% interest rates are reluctant to sell and take on a new loan at 7% or more. That so-called “lock-in effect” is forcing a growing number of people to become landlords by default.
