Many Starter Homes Have Shifted from Owner-Occupancy to Rentals

In this edition of Housing Insights, Fannie Mae's Economic & Strategic Research Group examines a key contributor to the recent shortage of starter homes: the shift in the nation's single-family housing stock from owner-occupancy to rentals during the housing bust and recovery.

Both demand- and supply-side factors have suppressed purchases by would-be first-time home buyers, which is slowing the housing recovery. But as the labor market has continued to heal and as young-adult incomes have begun to recover, much attention has focused on supply-side constraints. Tight mortgage credit is often cited as an obstacle – but a low inventory of for-sale starter homes appears to be a key impediment to the return of the first-time buyer.

This study analyzes net changes since the onset of the housing downturn in the number of starter homes that are owner- and renter-occupied, and how the tight starter home supply and rapid price gains in the lower tiers of the market are reducing first-time buyer affordability.

Read our latest edition of Housing Insights and hear from the author, Patrick Simmons, in his related Perspective.

Many Starter Homes Have Shifted from Owner-Occupancy to Rentals (PDF)