Homeownership…..The American Dream?

Is Homeownership the key to happiness in 2013?

Home prices are up. But homeownership has fallen to its lowest level since 1995. What gives? If the real estate market is so strong, and homes are selling faster and at higher prices than just one year ago, then shouldn’t homeownership rates be going up?

Let’s take a look at current real estate trends to see what’s going on.

* Investors are buying in bulk. Beginning about a year ago, hedge funds and investor groups have been snapping up real estate, often hundreds of homes at a time and especially on the East Coast. Some properties are distressed, such as foreclosures being bought in bulk from a bank, and are therefore acquired below market rates.

There have always been real estate investors, but now it’s different. Today’s investors see rising rental rates and depressed home values, compared to just three years ago. This presents a great opportunity. So a hedge fund buys homes in bulk, renovates them quickly, then puts them on the rental market. The numbers work out well, because rising rental rates offer a good ROI.

* More people are renting. The past few years has seen the rise of a new class of “eternal renters.” They may be people who got burned in the housing crisis and whose credit—along with their faith in real estate—is shot. They were rudely awakened from the American Dream of homeownership. So now they prefer to rent. It’s less complicated and risky. And they don’t have to worry about getting into financial hardship again.

In addition to the ‘eternal renters,’ some people just don’t want to be tied to a mortgage for 30 years. For example, today’s Generation Y and Millennial buyers may not want to live in the same town for the next three years, let alone five. People aren’t staying in their jobs for 30 years as they used to. It’s common to do two years in one job and move on. Given the growth of the Internet and the ease of travel, taking a job across the country or even across the world is much easier today. Today’s professionals are working long hours and are open to doing whatever it takes to help their career, including moving.

All these trends point toward a strong rental market, which investors are leveraging.

* The world’s a different place. The divorce rate has risen. Single women in their 30’s and married gay couples are the ‘new normal.’ Getting married out of high school or college, taking a job at IBM, building up your pension and buying a home in the suburbs with a 30-year-fixed rate loan isn’t the de-facto standard it was decades ago. The changing times are impacting homeownership rates.

And so, the American Dream of homeownership is evolving. There are new dreams coming to the surface in our always-on, always-connected world, such as having the flexibility to take a job in Denver or Dubai.

Homeownership still offers important rewards, financially (especially if you invest for the long-term) and emotionally (there’s something very satisfying owning your own home). Ultimately, though, homeownership is probably no longer the American dream it once was. Instead, it’s one of many American dreams.

 

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