Things Are Changing

website-pdf-download

Industry dynamics are changing so we all have to be agile. For example, the Research Institute for Housing America (RIHA) released a new study examining the shift of existing housing stock between owner-occupied and rental over time. The study was authored by Stuart S. Rosenthal, Maxwell Advisory Board Professor of Economics at Syracuse University.

Featured Sponsors:

 

 
The study found that between 2000 and 2014, roughly 6.5 percent of homes built prior to 2000 and 10.3 percent of homes built in the 1990s, shifted from owner-occupied to rental status.

150-quote

 

_______________________________________________________________________________________

 

A striking feature of the last housing crisis was the dramatic shift of owner-occupied homes into the rental sector.

Homes transition quite frequently, with rising prices shifting rental units into the owner-occupied sector and falling prices having the opposite effect.

____________________________________________________________________________________________________
 
“Homes transition quite frequently, with rising prices shifting rental units into the owner-occupied sector and falling prices having the opposite effect,” said Rosenthal. “In fact, over a decade, roughly 2 percent of the housing stock moves from owner to rental occupancy.”

Featured Sponsors:

 
“A striking feature of the last housing crisis was the dramatic shift of owner-occupied homes into the rental sector. This paper looks back historically to help understand how common such shifts have been and finds that the factors affecting the rate of change are quite similar over time,” said Lynn Fisher, Executive Director of RIHA and the Mortgage Bankers Association’s Vice President of Research and Economics. “Also it’s important to understand the dynamics of the existing housing stock, because they help explain how the market provides affordable housing, and how it adjusts in the face of changes in both supply and demand. This is especially true today, when new homes are adding such a small fraction to the existing home stock.”

150-quote

 

_______________________________________________________________________________________

 

The large volume of homes that transitioned from owner-occupied to renter-occupied since the crisis may act as a buffer stock of potential future owner-occupied housing.

The likelihood that a particular house transitions from owner-occupied to renter-occupied is 1 to 2 percent higher for homes slightly underwater.

____________________________________________________________________________________________________
 
The study additionally revealed that housing stock is more likely to move from owner-occupied to renter-occupied when the current occupant of a home is under water. In fact, the likelihood that a particular house transitions from owner-occupied to renter-occupied is 1 to 2 percent higher for homes slightly underwater, and 6 to 8 percentage points higher for homes that are deep underwater (i.e., those that have a combined loan-to-value ratio of 120 percent or greater).

Featured Sponsors:

 
Finally, the study suggests that the large volume of homes that transitioned from owner-occupied to renter-occupied since the crisis may act as a buffer stock of potential future owner-occupied housing, delaying recovery of new construction until a sufficient number of these now-rented homes have been reabsorbed back into owner-occupancy status.

About The Author

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.