The Rental Inventory is Problematic Too


There probably hasn’t been a report on home sales or
prices in the last four years that hasn’t referred to the role of housing
in the depressed level of the former or the rapid acceleration of the
latter.  According to data from CoreLogic,
there was a 4.5-month supply of homes available at the current rate of sales in
March.  (We assume that number includes both
new and pre-owned homes.)  This is less
than half the supply, 9.1 months, available in March 2009.

Shu Chen writes in CoreLogic’s Insights blog that that both new construction and the mobility of
homeowners have traditionally driven inventories and those are at low levels,
but the shifting of homes to the rental market has also played a large role.  This shift, of course, started with the
housing crisis as millions of owner-occupied homes were foreclosed and
thousands sold to investors.  They also purchased
many of the homes transferred through short sales. 

Using Multiple Listing Service data for 48 metro areas,
CoreLogic found that the share of homes listed as rentals constituted 8.7
percent of all available homes in March 2011 and for 14.2 percent in March



While the average rental share had eased back to 12.1
percent by this March, the share is much higher in some of metro areas.  Boston tops the list at a near 25 percent
share and Miami, Austin, Philadelphia, and Honolulu were all above a 20 percent
rental share.  Chen said the list of
higher share cities follow a pattern
– they are either fast growing, expensive,
or cities that were hit particularly hard with foreclosures.



While the
rental share of all real estate listings has gone up by about a third since the
foreclosure crisis and may have exacerbated the shortage of for-sale homes,
a high share of rental inventory doesn’t necessarily translate to an adequate
– it’s all relative. In Austin for example, the more than 20 percent
rental share was of a small overall inventory and the city had only a 1.7-month
supply of homes for rent.  In March of
this year 17 of the 48 markets had a rental share less than the U.S. average of
4.5 months.  Figure 4 illustrates that the
month’s supply of rentals has also declined from post-crisis levels.



Low levels of supply put upward
pressure on the cost of both for-sale and for-rent homes. Home prices, while
increasing at a slower pace over the past year, are still rising, as are
single-family rents.

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