Real Estate

The Own-To-Rent Impact On Residential Real Estate Sales

When the U.S. economy crashed in 2008 and kicked off the Great Recession, the U.S. housing market more or less fell into a gutter, where it remained for years before showing any real signs of recovery.

That the housing market was so hard hit wasn’t surprising, since it had been in a bubble buoyed by a combination of irresponsible mortgage underwriting and exotic financial products. The theory that housing prices would always go up — and therefore the buyer’s credit score, income and financial history really weren’t all that relevant — was rather aggressively disproved when real estate prices collapsed.

As a result, banks got a lot more stringent with lending standards, U.S. home-ownership rates plummeted and the real estate market set about slowly rebuilding itself after the bubble burst and helped sink the U.S. economy.

Which is what made a milestone passed in mid-June all the more eye-catching. Although America is once again mired in a deep financial crisis, the Census Bureau reported that the U.S. home-ownership rate has hit its highest level since 2008. It reached 67.9 percent, up from only 65.3 percent three months earlier.

Ralph McLaughlin, chief economist for Haus, a co-investment platform for home buyers, told Bloomberg that the COVID-related economic meltdown and low mortgage rates combined to make home-buying surprisingly attractive.

“Mortgage rates are the icing on the cake for households that were thinking about buying,” McLaughlin said. “[Buyers] found an unexpected opportunity during the worst economic downturn America has seen since the Great Depression.”

It turns out that even bad times have an upside, and not being the cause of the current crisis has meant that real estate is surprisingly resilient this time around.

The Unexpected Buyers’ Boom 

There is something surprising about a home-buying boom breaking out in a U.S. economy currently reporting an unemployment rate north of 10 percent. But the Mortgage Bankers Association reported that home-loan applications are up significantly over the same period last year — as is the average loan size.

Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said that seeming mismatch comes from the uneven impact that COVID-19 has had on U.S. workers. “These are households that did not have the same kind of employment or income interruption as a lot of the population,” Kan told Buzzfeed News. “These folks are able to work remotely, who are still getting paid.”

Such mostly white-collar workers are jumping at the near record-low mortgage rates currently available. Specifically, younger buyers are driving the current boom. The Census Bureau found that the home-ownership rate for buyers under age 35 rose to 40.6 percent in June — the highest level in almost 12 years.

“Clearly, young households not only want to become homeowners, but they are actually doing it,” McLaughlin said.

And doing it to such an extent that they’re creating a definite sellers’ market — which in turn is creating new options for sellers to extract value from the homes they already own.

The Seller’s Market And Innovative Options To Selling 

According to, home listings dropped in July, and more bidding wars broke out between potential buyers competing for a shrinking number of available homes.

“Buyers outnumber sellers in the housing market, which means it’s better to be a seller than a buyer,” Danielle Hale, chief economist at, said in a statement.

Contrary to popular tales about a great exodus currently happening from U.S. cities in response to the pandemic, figures indicate that housing prices are actually rising quickly in major U.S. metropolitan hubs. (However, interest is growing strongly in suburbs that are close to downtowns but offer yards and larger living spaces.)

In the second quarter, a whopping 96 percent of metro areas showed home-price appreciation and 15 cities reported double-digit growth, according to data from the National Association of Realtors.

And it’s that persistent growth in home prices that’s making many homeowners less apt to actually sell when they move for one reason or another, Knox Financial CEO and co-founder David Friedman told PYMNTS in a recent conversation.

“There is a common experience that millions of people go through, which is they are starting to move and it's time to sell the home they live in and they say to themselves: ‘Wait a minute, this is my best investment. What kind of an investor just walks away from their biggest best investment?’” Friedman said.

He said renting out houses instead of selling them offer homeowners lots of potential upside appreciation over the long term, particularly if people own houses in high-growth markets.

“So, they would like to convert it into a long-term investment when they're not living in it,” Friedman said. “But all the labor that goes into that is a bridge too far, as they do not want to have to take on the job of being a landlord.”

Companies like Knox Financial aim to pick up the work of being a landlord in return for a cut of the rent. That’s a service that an increasing number of potential home sellers are investigating as an option to keep an asset they might otherwise have to offload.

If they can. Most non-first-time home buyers use at least some proceeds from their last home’s sale as a down payment on their next one. For them, the ability to rent out a home over the long term doesn’t provide the short-term payout they need for their next property purchase.

But in a world where buyers are flooding into the market and staging bidding wars on houses they’ve only toured virtually, how we come to understand a sellers’ market might be changing.

Perhaps someday, the mark of a true sellers’ market will be how few people actually sell in it. And even if that’s a few steps past what the “next normal” for real estate will look like, one thing seems certain. While real estate is far from always recession-proof, this time around, it looks so far like it might be — and could even shape up to be an important part of the road to recovery.



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