• With mortgage interest rates hovering over 7.00%, prospective sellers may find themselves at least thinking about renting out instead of selling.
• About one in five (21%) homeowners with moving plans are considering renting out their home.
• How likely is it for them to actually follow through on becoming a landlord? The 2023 CHTR found that almost two in three (64%) of sellers had considered renting out their homes, but, in the end, did not. 
• Though holding on to their home and renting it out might initially seem more lucrative, the reality of juggling multiple homes and mortgages may present a rude awakening financially.

In September 2023, a survey from Zillow Group Population Science found that about one in five (21%) of homeowners with moving plans are considering renting out their home after they move instead of selling. 

Housing affordability remains low for both new and seasoned buyers

With interest rates above 7% and persistently high housing prices, housing affordability remains low for both new and seasoned buyers. Zillow’s 2023 Consumer Housing Trends report (CHTR) found that about half (48%) of mortgage buyers reported putting down less than 20% on the home they purchased and about a third (30%) put down less than 10%. With a 10% down payment, a new homebuyer making the median household income and buying the typical U.S. home in August would have spent almost 40% of their income on their mortgage payments.

As mortgage rates shot past 7%, the vast majority of homeowners would need to finance a new home at a higher rate than the rate they currently hold – adding hundreds of dollars to their monthly payments and creating an incentive to hold on to their home rather than sell. For some homeowners that might mean they choose not to move. For others, they may still plan to move, but might begin to consider becoming landlords rather than sellers to allow the build up of additional home equity with their non-portable, low-interest loan. 

How likely is it for homeowners to actually follow through on becoming a landlord?

As these homeowners navigate this new housing market and consider renting out, they may still ultimately decide to sell their home. From available evidence, how likely is it for them to actually follow through on becoming a landlord? 

The 2023 Consumer Housing Trends Report found that almost two in three sellers had considered renting out their homes, but, in the end, did not. About half of that group (30% of all sellers) seriously considered renting out over selling. Both ZG surveys found that younger respondents were more likely to consider renting out.

Homeowners financing expectations and reality are often a mismatch

Though holding on to their home and renting it out might initially seem more lucrative, prior evidence suggests that homeowners financing expectations vs. reality are often a mismatch. 

Another 2022 ZG Population Science survey found that only 21% of prospective buyer-sellers intended to sell first and then buy compared to 52% who planned to buy first, then sell. However, most (56%) successful buyer-sellers ended up selling their previous home before buying a new one. This discrepancy suggests that the reality of juggling multiple homes and mortgages may present a rude awakening financially. 

Since 2014, the actual share of landlord-households has hovered in the mid-5%

Even though one in five movers considering prospective landlordship is not a small number, the share of actual landlord-households has shown little evidence of major shifts in the past 9 years. Since 2014, the share of households receiving income from rent has fluctuated in the mid-5% according to the U.S. Census Bureau American Community Survey Annual Social and Economic Supplement (CPS-ASEC).

Still, ZG Population Science will keep an eye on what might be an early indication of homeowners’ preference to rent out over selling their current home.

Methodology 

These analyses use data from the ZG Population Science Mortgages and Moving Survey. Homeowners and renters 18 years of age and older who did not move within the last 12 months were eligible for participation. The survey was fielded September 2023 and included 3,188 adults: 2,177 homeowners and 1,011 renters.  For the purpose of this study, “homeowners” refers to household decision makers who live in a home they own. “Renters” refers to household decision makers who live in a home they rent.

To achieve national representativeness, quotas for age, education, sex, region, race, and marital status limited oversampling of any given demographic group. In addition to using quotas for respondent sampling, ZG Population Science weighted the sample to the overall U.S. population using the U.S. Census Bureau 2022 Current Population Survey Annual Social and Economic Supplement (CPS-ASEC) using these same characteristics.