Faced with a sudden move, 'reluctant landlords' have to find renters rather than buyers
Alan Johnson never planned on being a landlord.
But there he was, stuck with two options — become a landlord or pay two mortgages, in two different states.
As of May, 31.4 percent of all homeowners with mortgages wouldn't be able to pay them off if they needed to move suddenly. Or in other words, 16 million homeowners across the nation can't sell their house, according to data from Zillow. Though the housing market is turning around, the rocky economy forces some homeowners to quickly move to a different town or state without being able to pay off their mortgages first. Like Johnson, homeowners on the move are turning to a nontraditional method to save on finances.
"We have a lot of 'reluctant landlords,'" said Paul Smith, executive director for the Utah Apartment Association, speaking about Utah's housing market. "They didn't do it on purpose but for some reason they bought a new home or got (job) transferred and they can't get out of their current home what they owe so they choose to rent it."
Johnson became a reluctant landlord when he accepted a job offer in San Francisco, forcing him and his wife to leave behind their home in Herriman.
Though Johnson went through an agent to sell his 2,000-square-foot home, they weren't able to find any takers for the asking price and in the time frame they had in mind.
"It was difficult to compete with all the short-sells going on," Johnson said. "Due to the lack of interest we determined we weren't going to get an offer soon enough to justify leaning on the market another six months or whatever it would take to sell it."
Johnson put his home of four years on the market in August 2011 and took it off in mid-October of that year.
"I couldn't have it on the market for too long; I couldn't be paying for two house payments," he said.
Johnson and his wife are now living in a rented home in California.
As soon as he put his house for up for rent, though, he had more people interested. Johnson was able to rent his house to a couple who moved to Utah from Colorado.
They have been his only tenants so far.
Cases like these have been springing up more often compared to two years ago, said Donna Pozzuoli, president of the Salt Lake Board of Realtors.
This year, when a few of Pozzuoli's customers saw that they could only realistically sell their home for $20,000 to $30,000 less than what they were hoping, they switched to renting.
The housing market is slowly improving, leaving homeowners feeling confident. This year there has been an increase in housing sales and lower vacancy rates.
The dip in foreclosures has also improved the market. Foreclosures are down 24 percent from their peak and vacancy rates are lower, according to Trulia's American Dream Survey, which was released in April.
But despite the improving market, homeowners can become reluctant landlords depending on when they bought their home and at what price, Pozzuoli said.
"Though prices are stabilizing, in some cases they haven't come all the way back around for someone who may have financed the majority of the home and didn't put a lot into it for that equity," she said.
Studies have also shown that more middle- and upper-income families are renting. The states that have the most single-family homes being rented are those with the most foreclosure rates, such as California, Nevada and Arizona, according to the Harvard Research Center.
Some homeowners choose to rent their home because they see it as an investment. Since home value is down, many don't want to take a loss and will wait until the market improves, said Jill Simmons, spokeswoman for Zillow.