"The New American Dream: Renting?"
The idea of owning a home has long been touted as the "American Dream". In fact, it was this concept that led many Americans down the dangerous path of buying homes at unsustainable values while utilizing mortgage loan products that were later considered "toxic". Public and private enterprises are equally responsible for encouraging homeownership as a "right" for all Americans. The burst in the housing bubble, a collapse in home values, and a tightening in consumer credit are combining to promote "The New American Dream" … renting.
The average gap between owing a home and renting was historically $376, which means that it would have cost $376 more to own a home instead of renting. The flood of vacant homes and condos on the market has closed this gap to $70 in the current cycle. Many consumers are electing to become renters instead of owners. Of course, the large number of "shadow" rentals on the market is causing downward pressure on investment properties and bringing average rents down further. For example, less than a year ago, the average apartment vacancy in Greensboro was less than 10%, but today the vacancy is closer to 15%.
The recent boom in housing caused renting to fall out of favor with most consumers, but the continuing rise in unemployment creates uncertainty and that is not good for would be homeowners. Renting provides flexibility, so that if you need to move quickly, then you are not left with trying to liquidate your home. Specifically, the option to rent is a good utility for young consumers that are fresh out of college or still new to their careers.
In the past, consumers preferred the idea of owning over renting because of the common myth that homeownership is the same as investing. Misinformation about homeownership left many consumers feeling the value of their homes could never fall. These myths and many more are now becoming more evident as consumers recognize that home values do fall and owning a home should not be treated as a short-term investment or a piggybank that can be cracked open anytime. Despite the late-night infomercials, owning a home is not a required step to achieve financial independence.
The burst in the housing bubble ravaged families and businesses across our country. Undoubtedly, consumers are becoming wiser when they shop for a home by paying attention to market values, cost of credit, and job security. People are returning to the age-old axiom of "living within your means". Whether you choose to own or rent a home … depends on your "means". Learning how to make good choices that are based on your individual situation is the key to mastering your money and creating long-term wealth, which is "The Real American Dream".
Categories: Personal Finance, Business, Economy, Real Estate
Tags: algenon cash algenoncash personal finance greensboro aifl financial literacy keys to money mastery
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Algenon,
An interesting premise. I must admit to being one who contributed to the concept of owning as being more important. As for me, I'd still rather own than rent, but such is not my present fortune. I am lost by one argument however, in your treatise. The economics as presented in your second paragraph would seem to argue against your premise, rather than for it. Also, the statistic on vacancy rates would seem to argue against your premise. Can you further explain the economics and or vacancy rates as contributors to renting? Thank you.
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The point that I was trying to make by sharing the statistic on average vacancy rates is that the number of homes being rented is causing the vacancy rate in apartments to rise ... This is happening at a time when you would think apartments would be in favor because of the pain in housing ... however, more people are renting homes and condos in the current cycle because it is just as affordable as renting an apartment.
Thank you for taking time out and reading my thoughts ... I appreciate your feedback!
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Algenon,
I just got your newsletter. I actually wrote about renting in the context of people trying to live sustainably in my Green Notes blog for the News & Record (http://www.news-record.com/blog/52580/entry/66903)
Keep in mind that rental vacancy rates can go up and homeownership rates decline simultaneously if unemployed immigrants leave the country and if more people share housing. I have two immediate family members who have or plan to do that very thing. And yes, apartments are competing against single-family homes for tenants.
Another thought: As a former homeowner I've done the math on it and found that homeownership is oversold in this country on many different levels. It's primarily the emotional connection that gets people as fewer people today pay off the house so they can live in it without a monthly payment.
One of my friends who is a big fan of homeownership is selling her house after a few years and doesn't want to use an agent because the value has gone down.
It's expected that housing values will continue to drop with the retirement of the Baby Boomers.
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Algenon,
You miss the big picture. Today is the best time to buy a home because prices are at very low levels. I agree homeownership is not for everyone but tell that to the 200 families enrolled in our first time homebuyer programs. Just as everything else in America, the pendulum swings too far in opposite directions. The time to buy is now for first time homebuyers that can qualify for a prime, 30 year fixed rate mortgage. The has never been a need for subprime and it should never return. Thanks for this forum.
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I will agree it does seem the new American dream is renting.
Murray Lighting Services Corp. Electrical Contractors In Winston Salem Believe that we Need to revert to the old ways bring our industries back to the American People and maybe just maybe our children will have the opportunity to be doer's instead of buyers of foreign products and hopefully be able to purchase there own homes again.
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