• Sat. May 18th, 2024

Why More Homeowners Are Transitioning to Landlords

BySamantha Johnson

Apr 8, 2024
Why More Homeowners Are Transitioning to Landlords

Changes in mortgage rates and home prices in recent years have led more property owners to rent out their homes instead of selling. According to interviews and data from Investopedia, approximately 15% to 20% of homeowners who buy a new property choose to keep their old one in the Dallas market, based on information from a real estate listing website called Tomo.

The significant increase in mortgage rates is a key factor driving this trend. Prior to the pandemic, rates for 30-year fixed mortgages were exceptionally low, ranging from 3% to 4%. However, when the pandemic hit and the Federal Reserve slashed its benchmark interest rate to near zero, mortgage rates plummeted even further. In early 2021, the average mortgage rate hit a record low of 2.65% according to Freddie Mac.

As inflation increased in late 2021, mortgage rates began to rise, reaching nearly 8% by October 2023. This spike in rates has made many homeowners hesitant to sell their properties, as 89% of mortgage holders have rates below 6%. Getting a new mortgage would mean accepting a significantly higher rate, leading to a reluctance to sell.

This phenomenon, known as the mortgage “lock-in” effect, has resulted in low for-sale inventories and has prompted homeowners to rent out their properties instead. At the same time, rents have surged, particularly for sought-after single-family homes, which have seen a nearly 30% increase in rents since the start of the pandemic, based on recent data from CoreLogic.

As a result, more individuals are opting to rent out their homes to maintain their low mortgage rates, even if they need to move. This situation has created a new category of homeowners known as “accidental landlords,” who find themselves renting out their properties unexpectedly.

By Samantha Johnson

As a content writer at newszkz.com, I delve into the realms of storytelling, blending words to paint vivid narratives that captivate and inform our readers. With a keen eye for detail and a passion for research, I craft compelling articles that resonate with our audience. My love for words drives me to explore diverse topics, ensuring that each piece I create not only educates but also entertains. Join me on this journey as we navigate the ever-evolving landscapes of news and knowledge together.

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