Here’s a breakdown of the article,focusing on the key points:
Garret Johnson’s Situation (Plan B):
Problem: Garret Johnson bought a home in dallas two years ago. He recently got a new job in Houston adn tried to sell his Dallas home in March.
Reason for Difficulty Selling: Few buyers, many “lookers,” people waiting for better interest rates, and general economic uncertainty in March and April.
Solution (Plan B): He decided to rent out his home.
Outcome of Renting: He received several offers within the first few days of listing it for rent.
Financial Adjustments:
The rent doesn’t fully cover his mortgage.
He recast his loan and put more equity into the home to lower payments.
He switched to a landlord insurance policy for savings.
Future Outlook: He doesn’t expect to sell for several years and hopes to eventually turn a profit on the month-to-month rent versus mortgage.
Broader Market Trends:
rising Inventory: The number of homes for sale has been increasing over the past year, particularly in formerly popular “pandemic migration markets” like the Sun Belt.
Seller Reluctance: Sellers are hesitant to lower prices,having become accustomed to rapid price increases in recent years.
impact on Rental Market: As more homes enter the rental pool, it could reduce landlords’ ability to raise rents considerably.
Rent increases might be limited to 1-2% instead of 4-5%.
Though, large institutional landlords (INVH, AMH) are still achieving 4-5% renewal rates and high tenant retention.
Historical Context: This situation is not unprecedented; a similar trend occurred in 2022 after mortgage rates doubled,leading to an increase in people owning a second property.
Investor Behavior:
Large single-family rental REITs are selling more homes than they are buying.
They are shifting their focus to “build-to-rent” projects instead of competing for resale properties. This strategy aims to limit competition from “accidental landlords” (like Garret Johnson).
Potential Risks:
The slow selling season could lead to more supply entering the market in the fall and spring, potentially limiting rental growth for the next year.
Major landlords may need to accept some decline in occupancy to optimize revenue, rather than drastically cutting rents.