Has the American Dream of home ownership shifted to renting ? This is the question I ask today. Why are more and more folks renting today?
The Renting argument
1 There are credit issues. Many were caught in the mortgage crunch and have a foreclosure or a short sale they are working off. It may still be a couple of years before they can buy. And the bad taste of their prior experience may turn them off to buying again
2 It is cheaper to rent that to buy. In many markets rents are lower than payments for homes. Folks are reluctant to stretch.
3 The perception of appreciation and investment is not there. Even though from census to census home values have continued to rise. That's right from 2000 to 2010 they have still gone up. In spite of this folks feel that the investment is shaky. They are concerned that they will not be able to build the nest egg.
4 Congress keeps talking about getting rid of the tax advantage home owners have thus taking away another incentive to buy.
5 Jobs are becoming more and more mobile. If it is harder to sell your your to move with your job then why not be mobile and rent?
The buying argument
1 Even though Congress is talking the reality is you have a home ownership tax advantage today that is real.
2 Ownership is a great hedge against inflation. The thirty year fixed will be the same in 10 years but rents will go up.
3 The security of ownership and not having to worry about the property being sold out from under you is a big plus.
4 It is still in the American miind that a measure of sucess is ownership. In fact Warren Buffet has often said that real estate ownership is one leg on the stool of wealth.
5 Mobility is an issue. But more and more folks are enabled by technology, and can work from home. So the mobility issue cuts both ways
At the end of the day the notions and assumptions that home ownership is preferable to renting are being challenged today. Will we see a shift towards renting that is not driven by the economy but by choice ? I do not know. But I do believe the rules of the game have been changed by the housing crisis. Those changes may have a more lasting effect on the American Psyche long after the economic issues have faded.