Are homeowners increasing property prices through renting?

Several years after the housing bubble burst, many homeowners still owe more on their mortgages than what their homes are worth. Usually, this would mean that they cannot move without the risk of losing a significant amount of money. However, some homeowners have different plans, which may affect housing prices over time.

Consider Shelly and Keon Burley, who just bought a new house in suburban Baltimore, but still own their old home in the city's downtown area. The problem is that, according to an article on CNBC, they owe about $30,000 more on their old home than it is worth. At first, they considered selling it and accepting the loss, but then they decided to rent the home and try to make some money back.

"It really wasn't worth it to take that $30,000 hit, when we could get someone to rent the property, have them pay down the mortgage and get to a place where we could either get out for the same price or eventually maybe make a profit off of it, if we rent long enough," Shelly Burley told the news source.

It worked out well, and the couple was able to put 20 percent down on their new home while still retaining ownership of the old one. However, if this becomes a trend, it could actually restrict the supply of houses for resale.

As this blog has written previously, the U.S. construction sector is having difficulty keeping up with demand for homes for a variety of reasons. If existing homes are rented out, prospective buyers might have trouble finding available houses that they can afford. This could push up values of existing stock and put more pressure on new home builders.

To keep pace, insurance companies need a reliable valuation system that calculates replacement costs for increasingly expensive houses, as well as commercial properties.