The Rise of the ‘Accidental Landlords’ and What This Means for Renters in These Desirable Metros

After living two years in Dallas, Garret Johnson was offered a new job in Houston, meaning he would have to sell his house. He thought it would be easy—but like many sellers in the market right now, he ultimately decided to delist his place. 

“There weren’t many buyers, just lookers, and people were biding their time waiting for better rates,” Johnson told CNBC. There was "a lot of economic uncertainty in those months, March and April, that we had listed the house, so I think that played a factor as well.” 

After a few months, Johnson decided to try putting his home up for rent, a decision many homeowners in his area, as well as other previously popular metros, are making. Rather than selling their home at a loss—or at least for a lot less than they think their house is worth—homeowners are dipping their toes into the rental market, much to the chagrin of institutional investors in the rental space.

Delistings surge nearly 50% as sellers quit the market in frustration

Delistings jumped 47% nationally in May from a year earlier, according to the Realtor.com® economic research team's latest monthly housing trends report. Year to date, delistings are up 35% from the same period in 2024.

"This year’s market is a study in contrasts," says Danielle Hale, chief economist at Realtor.com. "Buyers are seeing more choices than they’ve had in years. But many sellers, anchored by peak price expectations and upheld by strong equity positions, are deciding to step back if they don’t get their number."

Institutional investors with portfolios exceeding 50,000 homes remain heavily concentrated in just a handful of U.S. metros.

According to a Parcl Labs analysis, more than a third of each company's holdings are located in six metro areas: Atlanta; Phoenix; Houston, Tampa, FL; Charlotte, NC, and Dallas. These markets have posted inventory increases of 20% or more over the past year, much of it driven by former owner-occupied homes coming to market, according to the analysis. 

“When these home sellers cannot find buyers, they face three choices: delist and wait, cut price to find market clearing level, or convert to rental. The last option creates what Parcl Labs terms ‘accidental landlords’: Owners who enter the single-family rental market not by design, but by necessity,” wrote Jesus Leal Trujillo, principal data scientist at Parcl Labs, in the report. 

"Many sellers are anchoring their asking prices to the record highs of a few years ago, when inventory was scarce and mortgage rates were far lower, but are now finding little interest from today’s more cautious buyers," adds Hannah Jones, senior economic research analyst with Realtor.com.

"As a result, listings are increasingly going stale, facing price cuts, or being pulled from the market entirely, with some sellers opting to rent out their homes instead."

The reality of being a landlord

Jones notes that sellers in Dallas are in a “challenging position” compared with a few years ago. With for-sale inventory nearly 40% higher in the Dallas metro in June compared with one year ago, sellers need to be “flexible to attract buyer attention”.

Perhaps that's why, despite struggling to find a buyer for his home, Johnson had his choice of offers within a few days of listing his place for rent.

Unfortunately, the rent doesn’t fully cover his mortgage. In order to lower his payments to meet the rent, he’s had to recast his loan and put more equity back into the home. 

Now, he told CNBC, he doesn’t expect to sell for several years. 

“I’ve gotten to be creative, and hopefully the goal is, in the next few years, to start to turn a profit on the month-to-month basis of the rent versus mortgage,” he said. 

Profit is the name of the game for homeowners, whether it be selling their home or renting it out. 

"Unlike past housing cycles where falling prices pressured underwater homeowners to sell, today's homeowners benefit from record-high levels of home equity, so they have the flexibility to wait it out," says Realtor.com Senior Economist Jake Krimmel. "This allows many sellers to withdraw their homes from the market if their asking price isn't met."

A good deal for renters?

The aftermath of sellers switching gears from letting properties go to renting them out is two-fold. First, it severely limits the inventory available for buyers.

The Realtor.com Housing Forecast Midyear Update released in July provided revised projections for trends in mortgage rates, home sales, and home prices in 2025, and the fear is that home sales will fall to a new three-decade low in 2025.

There was an expected bump in home sales, but that hasn’t quite happened. Even with more homes hitting the market, high mortgage rates and record prices are still keeping many buyers on the sidelines.

Second, while the expansion of the single-family rental market does offer them more options, renters shouldn't expect to save a ton of money.

“You’re not going to see big reductions in rent," Haendel St. Juste, a senior equity research analyst at Mizuho Securities, told CNBC.

However, with more competition, institutional investors might be forced to do away with 4% or 5% increases on your rent.

"Maybe it’s just 1% to 2% in some cases,” he added.

Rental prices today

Rents in the top 20 U.S. markets for single-family homes are expected to rise 0.8% this year, according to John Burns Research & Consulting. That would be the slowest pace since 2011, when job losses caused by the global financial crisis made it hard to increase rent.

With so many young people still priced out of the market and stuck renting, investors of rental properties should be flooded with applications. And yet, with the rental supply being bolstered by home owners unwilling to settle for selling for less and renting out instead, not only only does this create more competition, but it's keeping rent prices more reasonable.

For instance, the number of homes for sale in Dallas and Tampa in August was 25% and 39% higher, respectively, than in August 2019. Then again, rental listings were also up significantly in both markets.

“Historically, when the for-sale market slows and there is lots of inventory but not much demand, you get leakage into the single-family rental industry,” Rick Palacios, director of research at John Burns Research & Consulting, told the Wall Street Journal.