Right now, many sellers are finding that they’re not exactly getting what they thought they would when they try to sell their homes. In some cases, sellers are deciding to forego an immediate sale at a price they find less than palatable, and instead focus on renting their homes, as they try to wait out the market.
Renting isn’t always the optimal choice for a seller because it doesn’t free up liquidity if they need to immediately purchase another home. Additionally, sellers have to act as landlords and be responsible for a property, even though they may have moved across the country. A renter won’t necessarily maintain a home as well as the owner, so when it comes time to try and resell, the owner may have to make improvements and fix problems from the renter’s stay.
That being said, there are some advantages to renting a home in today’s market…
1. Right now there are many people who would like to buy a home, but can’t because of the current state of the mortgage market. Either their credit scores are too low or they need more time to save for a larger down payment. There is a large market of renters currently available, allowing sellers to sometimes command enough rent for their house to cover all of their carrying expenses.
2. If a seller does not need to liquidate their investment (house) immediately they can take their time and try to wait out the market. This can work especially well if all of their carrying expenses are covered by the renters. When the market starts to turn in seller’s favor, they can typically react by trying again.
I have noticed an uptick in sellers renting their properties this year and thought it would be interesting to see if there was data to support this observation. Here is the Multiple Listing Service data for Single Family home rentals in the Greater Hartford area…
Most towns in Greater Hartford have seen an increase in the number of single family home rentals in 2008 when compared to the same time period in 2007. Overall, single family home rentals in these towns have increased by 47% over 2007. It’s also important to keep in mind that these rentals only take into account the properties that are brokered by real estate companies. Many sellers are privately trying to rent their homes after they are unsuccessful at selling, so the increase may actually be even more significant.
It’s important to keep in mind that most sellers would prefer to sell their house outright, rather than rent. Typically when you see a house for rent, it will also be for sale at the same time. The seller would prefer a sale, but will take a good renter if they find one.
Additionally, if you’re looking for a house to rent, the column “Number of Active Rentals of Single Family Houses” should help you focus your search, as you can see which towns have the most options currently available.