WASHINGTON – There are many reasons cited for the slow recovery of the single-family housing market and low number of homes for sales, including tight credit, underwater homeowners and those who want to stay in their houses for longer than usual.
But one factor usually overlooked is the supply of single-family homes that are locked up as rentals. There are 90 million single-family homes in the U.S. and the stock of rentals for such houses jumped 33% to 12 million in 2013 from 9 million in 2006, according to the Census Bureau.
Current rental stock of single-family homes is likely over 15 million, and could increase by another million next year, according to Rick Sharga, senior vice president at Auction.com.
It appears a limited number of these rental properties are entering the pool of homes for sale.
"It is the reason the housing market is tight and these properties are likely to remain rentals for a long time," said Frank Nothaft, chief economist at CoreLogic, at an Urban Institute/CoreLogic sponsored housing conference last month.
Hedge funds, specialty real estate investment trusts and local mom and investors snatched up distressed properties in the wake of the foreclosure crisis. Many of these investors continue to buy up property, depleting the available supply.
Investors are "buying more than they sell and very often they are selling to other investors," said Sharga in a recent interview.
Lawrence Yun, the chief economist of the National Association of Realtors, said he expects to see a "steady release" of the rental properties, but it is "not in the investors' interest to flood the market."
Yun said investors have obtained "sizable, unexpected capital gains due to price appreciation" as house prices have jumped 40% or 50% from the low point.
"Some might be enticed to sell," in states like Arizona and Florida. "If they want to sell, that would be good development because it would relieve the inventory shortage for the home buying market," he said.
The growth in rentals has had a positive side effect, allowing a large number of families that lost their homes during the crisis an opportunity to live in a single-family home, said David Crowe, chief economist of the National Association of Home Builders.
As renters "get back on their feet and qualify for credit," Crowe said, they should be able to buy a home again. "It is a flexible inventory that can move in and out of renting."
There are only 2 million existing homes for sale right now.
"That is low by historical standards," Crowe said. "I think the low inventory has more to do with the people that own their homes are unwilling to sell. The inventory is so tight and they can't find a house to buy."
In the early 2000s, inventory was not a problem. Single-family housing starts were running at the 1.3 million level and new home sales averaged 1 million a year.
But today, builders can't seem to get the ball rolling.
"Builders that rely on community banks for financing are still having difficulty getting construction loans," Yun said. "And builders that can obtain financing are having a hard time finding skilled construction workers."
For 2016, Home Builder economists are predicting some improvement. Single-family starts are forecast to jump to 875,000 in 2016, up 22% from 2015. And new home sales are forecast to total 508,000 in 2015 and 641,000 next year.
CoreLogic's Nothaft expects more millennials will be entering the home buying market in 2016, taking existing home sales up to 5 million in 2016 — the highest level since 2007.
But the Home Builders are not depending on first-time buyers.
In terms of buyers, "we are counting on existing homeowners who have to move up," Crowe said. "They need another bedroom for a new child or they are changing jobs and have to move."
