SEATTLE—Apartments aren't the only cause, or beneficiary, of the trend toward renting rather than owning. Zillow said Wednesday that the number of homes that would sell in a single year is down by about 5% compared to 2006, due largely to demand for single-family rentals. Hundreds of thousands of homes that may have otherwise sold in a typical year over the past decade– particularly more-affordable homes—have instead been taken off the market and converted to rentals, a trend that exploded in popularity in recent years and is only now beginning to level off,” according to Zillow.

In large measure, that's because SFRs tend toward the less expensive end of the housing market, i.e. where first-time homebuyers would gravitate, thereby limiting these buyers' options and driving up prices. The inventory of SFRs grew by about 5.4 million between '06 and early 2017, while at the same time new construction was occurring at a slower pace.

Over the past five years, the homes being bought and converted to rentals increasingly have been what in any other market would be considered starter homes. Nearly 40% of rented single-family homes bought since 2012 are among the most affordable, compared to 34% of SFRs that were bought prior to the housing market crash. The share of single-family homes being rented out increased from about 13% in 2007 to a high of 19.2% in 2016; it has since leveled off slightly to 18.9%.

“For the past 10 years, the number of single-family homes that are rented has grown steadily and remains near the highest levels ever recorded,” says Zillow senior economist Aaron Terrazas. “The combination of foreclosures and growing rental demand following the housing crash was an attractive opportunity for investors—large and small—who were able to buy foreclosed homes and use them to meet the rental demand.”

At the same time, Terrazas says, “Many longtime owners have opted to hold onto their homes as rentals even after they decide to move somewhere else. With such a large portion of single-family homes being rented out, and with new homes being built more slowly than the market needs, home values will continue to rise, particularly among the most affordable homes with the highest demand.”

Nationally, 37% of rented single-family homes are among the least valuable in their housing markets. In Detroit, Cleveland and St. Louis, the figure rises to more than 50%. Conversely, for Boston, San Jose and Seattle, upward of 40% of SFRs are among the priciest third of homes in those communities.

Instant Insights /

SFR Demand Eats Into Home Sales

Related Stories

Recommended For You