Single-family rentals have been a great way for some builders to maintain their equity during the recession, and there's been a large growth in this housing type over the last five years.

As home values return to pre-recession levels, property owners holding on to single-family rentals are finally preparing to sell these assets to interested home owners. This, writes Steve Cook, could be dampening the new home sales today by putting more existing homes on the market.

A new study by one of the nation’s leading housing economists for the Research Institute for Housing America, a think tank operated by the Mortgage Bankers Association, raises even more reasons to be worried. The study, by Professor Stuart S. Rosenthal of Syracuse University, investigated the market dynamics of houses as they transition from ownership to rental and vice versa.

Rosenthal notes new construction is already suffering. While home prices are returning their 2006 peaks, permits for single-family construction are still far below their 2005 peak. Moreover, he believes the worst may be yet to come, since more homes are still transitioning from ownership to rental than from rental to ownership.

So if he’s right, the return to 2006 -level prices is a sign that market conditions are reversing and heralding the coming transition from rental to ownership. That will be good news for existing home inventories, but not-so-good news for home builders.

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