Homeowners struggling to sell their homes are becoming “accidental landlords” at a rate that is reaching a three-year high and on track to surpass the previous record.
New research from Zillow found that cities in the Lone Star State account for three of the top five metros by their share of homeowners who become landlords after being unable to sell their homes and putting their property up for rent.
Houston had the nation’s second-highest share of accidental landlords, where such homes account for 4.2% of rental stock. Austin landed at No. 3 with 4.1% of rentals listed by accidental landlords, San Antonio was No. 4 with 3.9% and Dallas was No. 8 with 3.4%.
Because Zillow posts for-sale and rental listings, its platform is able to track unsold homes that reenter the market as rentals.
The trend is occuring mainly in markets that are less competitive for home buyers. The buyer-friendly environment leads to for-sale listings that last longer and often lead to price cuts.
While Texas homeowners are probably not thrilled their properties aren’t selling, Zillow says it’s a good sign. Homeowners aren’t selling because of foreclosure or out of necessity.
“Today’s sellers are rarely forced to sell,” said Zillow Senior Economist Kara Ng. “It appears they are often unwilling to budge off of what their heart says their home is worth.”
Data from October found the number of for-rent homes that had recently been on the market reached its second-largest number across the U.S., accounting for 2.3% of the nation’s rental stock. The percentage is continuing to grow, inching toward the 2.4% record set in November 2022.
Homeowners then were dealing with a market that looked a lot different than today’s. Earlier that year, mortgage rates nearly doubled from 3.1% to 7.1%. The shock-induced rental situation is in stark contrast to what’s happening now, Zillow says, and is driven more by choice.
“As the market continues to rebalance, sellers are facing a different reality than they did a few years ago,” Ng said. “Bargaining power is tilting toward buyers and homes are taking longer to sell, making renting out a property one way to buy time rather than compete aggressively on price.”
The metric is seasonal and peaks in November, as sellers lose hope during the end of the home-shopping season, Zillow said. As the amount of accidental landlords continues to grow and with only a one-tenth of 1% difference, the metric could easily surpass the November 2022 record this fall.
The most common type of property to fall into the category are detached single-family homes, accounting for 3.4% of the accidental landlord rental stock.
Denver led the nation’s metros with the highest share of accidental landlords, at 4.9%.
In contrast, states with the lowest share of accidental landlords were in places where competition is high for homes. They were concentrated on the East Coast, with Providence, R.I., and Boston leading the way with only a 0.6% share of accidental landlords.