Home Owner-Landlords on the Rise
A growing number of home owners reportedly are holding onto their former homes and opting to become landlords instead. After snagging a low mortgage rate in the 3 percent range, some home owners say the loan package's all-time-low financing is too good to give up, so they’re keeping their home and taking on the role of landlord, CNNMoney reports about the growing trend.
It’s a trend that National Association of REALTORS®’ Chief Economist Lawrence Yun recently pointed to during last week’s National Association of Real Estate Editors conference. “We have more everyday folks becoming unplanned, accidental landlords in the future because they don’t want to give up their 3.5 percent rate,” Yun said.
This increase in landlords could take a toll on the housing market, as every home converted into a rental property becomes one less that goes on the market for sale, says Glenn Kelman, CEO of the brokerage Redfin.
“It’s a major reason we have low inventory and limited sales growth,” Kelman told CNNMoney. "Clients tell us all the time, 'We're never going to sell our home, even after we buy a new one.'”
Indeed, home owner Chris Cannon says he and his wife plan to move to a new home to start a family, but he’s not parting with his current home. “It would be incredibly hard to give up the 3 percent mortgage we have,” Cannon told CNNMoney. “When we bought in November 2012, rates were at the bottom – about 3.4 percent for a 30-year – and we paid a couple of points to get ours down to 3 percent.” Cannon says that he plans to rent his Mt. Lebanon, Pa., home for $1,400 to $1,500 a month, which will cover his mortgage payment and taxes (which are about $1,100 month).
With rental costs rising about 20 percent nationwide since mid-2006, home owners are finding that assuming the role of landlord could work in their favor. However, some housing experts say that some home owners may be naïve about the challenges landlords face, particularly when it comes to facing repairs, dealing with at-times demanding tenants, and having to cover expenses whenever the property sits vacant.
Source: “More Home Owners Becoming Landlords,” CNNMoney (June 17, 2014)