The number of accidental landlords is expected to grow as interest rates remain high and frustrated sellers are deciding to delist their properties and instead offer them on the rental market, according to reports.
Delistings jumped 47% nationally in May from a year earlier, according to the Realtor.com® economic research team’s latest monthly housing trends report. Year to date, delistings are up 35% from the same period in 2024.
“This year’s market is a study in contrasts,” says Danielle Hale, chief economist of Realtor.com. “Buyers are seeing more choices than they’ve had in years. But many sellers, anchored by peak price expectations and upheld by strong equity positions, are deciding to step back if they don’t get their number.”
With the rising supply of homes for sale, plus high mortgage rates and waning consumer confidence, more potential buyers are staying on the sidelines, writes Diana Orick in the CNBC Property Play newsletter. Some frustrated sellers are deciding to delist their properties and instead offer them on the rental market.
“When these home sellers cannot find buyers, they face three choices: delist and wait, cut price to find market-clearing level, or convert to rental. The last option creates what Parcl Labs terms ‘accidental landlords’: Owners who enter the single-family rental market not by design, but by necessity,” wrote Jesus Leal Trujillo, principal data scientist at Parcl Labs.
The inventory of homes for sale has already been growing steadily over the past year, especially in formerly hot pandemic-migration markets like the Sun Belt.
Homes are sitting on the market longer as sellers, used to the heady price hikes of the last five years, are reluctant to lower their prices. As more for-sale supply enters the rental pool, that could limit landlord pricing power.
“You’re not going to see big reductions in rent, but maybe you won’t be able to get 4% or 5% increases on your rent. Maybe it’s just 1% to 2% in some cases,” said Haendel St. Juste, a senior equity research analyst at Mizuho Securities, in an interview with CNBC. “But the professional big guys have been getting 4% to 5% renewal rates and 75% retention in their portfolio. So, keeping people in the homes at 4% to 5% rent is a key part of their business model.”
What The Big Institutional Landlords Are Doing
“We saw something like this in 2022 after mortgage rates doubled: A huge uptick in the number of people who owned one property besides their primary residence,” said Rick Sharga, CEO of CJ Patrick Co., a real estate advisory firm.
“They are deploying more funds into build-to-rent projects, rather than competing with smaller investors and traditional homebuyers for resale properties,” he said, suggesting that doing so limits the threat from those so-called accidental landlords.
That minimizes some of the risk, but St. Juste said the biggest landlords will have to incur some occupancy decline in order to optimize their revenue, as opposed to just slashing rents.
“The incremental risk from this slow selling season is that there could be more supply, you know, come this fall, come next spring, that could limit some of the rental growth upside for next year,” he said.
