According to a recent report by Zillow, if American homeowners moved at the same rate they did in 1990, there would have been about 2.8 million more homes sold in 2016. This would solve the ongoing inventory problem, but the fact is Americans just aren’t moving, for a number of reasons.
Zillow cites three possible reasons for a non-moving population: an aging population, pockets of high negative equity, and an increase in single-family rentals. Zillow notes that the last factor, the increase in single family rentals, carries the most weight.
Elderly homeowners are the least likely to move, according to Zillow research, but the overall moving rate has been declining for all demographics. Additionally, the shifting age profil of the American populations accounts for just one-fifth of the decline in the aggregate migration rate since 1990.
Another factor that may be weighing on inventory is negative equity. Following the housing crisis, many homeowners found themselves in homes worth less than their outstanding mortgage. This prevented plenty of homeowners from moving. Negative equity weighed especially heavy on the turnover rate in 2012 and 2013, according to Zillow. However, while negative equity was a major factor on the migration rate post-crisis, it still does not explain the current levels.
Zillow states that the heaviest factor weighing on inventory concerns is the rise in single-family rentals. Investors purchased numerous foreclosed homes in the post-crisis market and converted them into rentals. Since the recession, the share of single-family renters has increased from 12.7 percent in 2005 to 19.2 percent in 2016, while the number of owner-occupied homes fell by 680,00 in that same timeframe.
The higher amounts of rental homes means more options for homeowners and less for buyers, as rentals are put up for sale much less frequently. Zillow says that “the shift of single-family homes from the owner-occupied to the rental-occupied housing stock is a strong candidate to explain the structural shift in single-family home turnover, above and beyond the relatively minor demographic headwinds from aging.”