Growing Link Between For-Sale and Rental Markets Amid Shifting Housing Trends
Single-family rentals make up 32 percent of all rental households
By Michael Lucarelli October 24, 2024 12:05 pm
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Key shifts in the U.S. housing market are increasingly reshaping the rental landscape. With more property owners opting to rent out their properties instead of selling them, it is evident that the for-sale and rental markets are becoming more intertwined. This trend is fueled by a combination of factors, including high mortgage rates, limited housing inventory, and life events that drive housing decisions. As a result, homeowners are seizing opportunities in the strong rental market, creating a ripple effect that influences housing stability, inventory levels, and affordability.
Life events and housing decisions
About 82 percent of sellers are motivated by life events such as changes in family size or employment, according to a recent Zillow report. While these events often lead people to sell their homes, just over half of sellers (54 percent) are purchasing new properties, the lowest percentage since at least 2018.
This suggests that a portion of sellers may be turning to the rental market for their next move, keeping both markets in constant motion. In particular, those navigating personal changes like marriage, divorce or separation (37 percent) are likely to rent as a more flexible option during transitional periods, according to the report. As a result, demand for rentals remains strong, especially for short-term leases, while these individuals determine their next steps.
Sellers contemplating the rental market
Two-thirds (66 percent) of sellers have at least considered renting out their home before ultimately selling, according to the report. This growing financial appeal of holding onto property as an investment reflects the ever-increasing demand from renters.
With high mortgage rates pushing potential buyers out of the market, homeowners are recognizing the value of generating steady rental income as a viable alternative.
Single-family rentals, which now make up 31.5 percent of all rental households, play a crucial role in stabilizing the rental market. However, this trend raises concerns about long-term supply for buyers, as more homes remain in the rental pool rather than being available for sale.
As homeowners opt to rent out properties, it further tightens housing inventory, adding to the challenges that already exist for would-be buyers.
The rental market’s future in a seller’s market
As high mortgage rates and low housing inventory persist, the connection between the for-sale and rental markets will only strengthen. More potential buyers will continue to rent due to affordability issues, keeping demand for rental housing robust.
At the same time, homeowners will increasingly view renting out their properties as an attractive alternative to selling in a challenging market. This evolving relationship between renting and selling highlights how deeply linked these markets have become and the key role they will play in shaping the future of housing.
Michael Lucarelli is the CEO and co-founder of RentSpree.
