The trend of renting out homes has increased in recent years due to changes in mortgage rates and home prices. According to interviews and data from Investopedia, approximately 15% to 20% of homeowners who buy a new property choose to keep their old one in the Dallas market, based on information from a real estate listing website called Tomo.
The significant increase in mortgage rates is a key factor driving this trend. Prior to the pandemic, rates for 30-year fixed mortgages were exceptionally low, ranging from 3% to 4%. However, when the pandemic hit and the Federal Reserve slashed its benchmark interest rate to near zero, mortgage rates plummeted even further. In early 2021, the average mortgage rate hit a record low of 2.65% according to Freddie Mac.
As inflation increased in late 2021, mortgage rates began to rise, reaching nearly 8% by October 2023. This spike in rates has made many homeowners hesitant to sell their properties, as 89% of mortgage holders have rates below 6%. Getting a new mortgage would mean accepting a significantly higher rate, leading to a reluctance to sell.
This phenomenon, known as the mortgage “lock-in” effect, has resulted in low for-sale inventories and has prompted homeowners to rent out their properties instead. At the same time, rents have surged, particularly for sought-after single-family homes, which have seen a nearly 30% increase in rents since the start of the pandemic, based on recent data from CoreLogic.
As a result of this trend more individuals are opting to rent out their homes rather than selling them due