Metro areas that experienced more foreclosures during the housing bust have seen a larger increase in the share of single-family homes that are rented, according to a recent report from Zillow. The increase in the share of single-family homes that are rented has shown to be most prominent in the Southwest United States.
Zillow states that a growing share of single-family homes are now being rented, and by extension, more of the country’s rental market is now composed of single-family homes. The report states that for much of the 1980s and 1990s, the share of single-family homes that were rented hovered between 12 percent and 15 percent, with that share slightly decreasing during the housing boom years. Since the housing bust, though, the share has skyrocketed and has increased from 13.4 percent in early 2007 to 18.8 percent by early 2015.
Similarly, for much of the 1980s and 1990s single-family homes accounted for roughly one-quarter of the country’s rental market. The report states that in spring 2007, single-family homes were 30.5 percent of all rental units but by spring 2015, they were 36.5 percent of all rental units.
The increase in the share of single-family homes that are rented has been most predominant in metro markets in the Southwest. The report cites Las Vegas as having experienced the largest increase, rising 13.1 percentage points from 16.1 percent in 2005 to 29.1 percent in 2014. The report says that the next highest increase is attributed to Merced, California with a rate of 24.7 percent increased to 36.6 percent. Following Merced is Phoenix with an increase from 11.8 percent to 23.4 percent and Vallejo, California with an increase of 14.7 percent to 25.9 percent.
Zillow attributes the large increase in rented single-family homes in the Southwest to the fact that Southwestern markets were hit very hard by the housing bust. When homeowners were foreclosed upon, millions of families looking for a place to live turned to renting the same kind of single-family homes they had previously owned prior to foreclosure. And Zillow says that during the years following the housing bust, investors purchased foreclosed homes and converted them to rentals in many of these hard hit communities to meet the new demand.
Zillow’s research details the share of single-family homes that are rentals having increased more in the metros with the most foreclosure activity. They ranked metros by the intensity of foreclosures between 2009 and 2011, and then took the average of the share of single-family homes in those metros that are rentals. It was found that in the metros with the most foreclosure activity, the share of single family homes that are rentals increased 7 percentage points from 19.2 percent in 2005 to 26.2 percent in 2014. In contrast, the metros with the least foreclosure activity showed that the share of single-family homes that are rentals increased by 2.7 percentage points, from 10.1 percent to 12.8 percent.