Get ready for the 'rentership' society
A new report predicts homeownership will fall to a record low because of foreclosures and tight credit.
The United States is on its way to becoming a society of renters, according to a new report from Morgan Stanley.
If all those homeowners who were delinquent on their mortgages were taken out of the statistics, the homeownership rate in the United States would be only 59.7%, the lowest since the U.S. Census Bureau began keeping records in 1965, when the rate of homeownership was 62.9%.
Calculated the conventional way, the rate of homeownership has fallen from a peak of 69.2% in 2004 to 66.4% earlier this year. But if you take the 7.5 million homeowners who are delinquent on their mortgages out of the equation and assume they are renters, that rate falls to 59.7%, according to Morgan Stanley's analysts.
The combination of the foreclosure crisis and the difficulty of getting a mortgage are turning Americans who used to own homes, and some who want to own homes, into renters, said Morgan Stanley analyst Oliver Chang.
"Taken together they are forcibly moving the country away from being an ownership society," Chang told Bloomberg in an email. “This change is only beginning, and is moving the country toward becoming a rentership society."
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There has been a lot of talk about whether the real-estate crisis has prompted more Americans to choose to rent rather than buy. But the truth is that foreclosures and tight credit have taken the choice out of many people's hands.
A variety of economic factors may determine whether young people will get good jobs and move out of their parents' basements and form their own households, whether by renting or buying. Surveys show that young people still aspire to own their own home, but how many will be able to do so will depend on economic factors as well.
Morgan Stanley predicts many will stay renters, as Housing Wire reports:
[Reform of Fannie Mae and Freddie Mac], Dodd-Frank securitization rules, mortgage interest deduction reform, continued home price declines and a long workout period for distressed homes will likely make it harder to buy an owner-occupied home.
As such, we believe that the U.S. will become a rentership society, in which the homeownership rate will keep falling, the home rentership rate will conversely rise, and the rental market will dominate the investment landscape in housing for years to come.
What do you think? Are we on the way to becoming a nation of renters?
As a current homeowner with a mortgage, I also question the institution of homeownership but for slightly different reasons than foreclosure and interest rates.
My wife and I are able to pay our mortgage and will pay it off over the next few years. Once that occurs and assuming we are healthy enough to maintain the yard and up-keep of the house, we'll stay in it indefinitely. However, I believe there will come a time in the next 5-10 years when the responsibilities of owning a home will become a burden and we'll want to move into something smaller. This will reduce the amount of yardwork we need to do and free us up for other things, not having to worry about things when we're away. The question we are facing right now, however, is whether to buy something or rent and with real estate taxes being so high and home-owner's/maintenance fees charged for condo's, we will seriously consider renting rather than buying.
Hmmm.. So Sad that Americans can't buy/own a home that will preserve, and grow in value anymore. The government-sponsored, real estate bubble-to-bust market, is now swamped by never-needed-and-now-abandoned units, that will take 8+years to absorb.
Renters have ALWAYS paid ALL the expenses of a property, plus the landlord's profit. I guess many Americans are now considered "transient".
Rumor has it, that the last American, in the U.S., to believe in the "American Dream" stopped.
Buck Fush and OUR toxic, corrupt government!ruly disgusted by the fleecing of
I was going to call you idiotic, brainless, mentally ill members of an embarrassing situation and much more. However, I decided not to do that, for it would be a waste of my energy. But I can say this, you all deserve what you are getting shoved up your A$$3$ while pretending tomorrow everything will be a new day full of opportunities, while the Chinese and other Asians background new comers are buying homes in the Bay Area and San Francisco by taking advantage of the opportunities presented to them by their own kind (City Government official know it, Building Inspectors know it, plus Chinese and other corrupt realtors and real estate know it, and what is worse, neighbors know it!). But off course there are others doing the same<> blacks and whites, Russians, Philippines, etc. I won’t say what that is, for if you fools are so intelligent, you should see them taking advantage of the system, and draining Government Financial Aid resources while earning incomes from renting for cash, and having their kids in some kind of financial aid.
Good for you Chinese citizens, keep on renting those illegal units and apartments built in back of your homes, and up to four, five and six room in your homes while renting for cash. Good for you go on and continue buying San Francisco. They, those American born kids, joining the Armed Forces and those sons and daughters of Americans citizens paying their fair share of taxes don’t deserve it. Whites Americans don’t deserve it, Black Americans don’t deserve it, Latin Americans don’t deserve it, nor do any other race covering up for you<>for they are fools on a hill.
I have been a Southern California home owner since 1987. I started with a small home in a modest neighborhood and after 4 years moved into a larger home in a better part of the same city.
I did this in a depressed market in 1992, where home values dropped almost as dramatically as they have most recently. The interest rates were quite a bit higher than they are right now (about 8%), even with good credit. you still had to have 5% to 10% down to qualify and we we not making a ton of money (remember S&L crisis).
I think now is a good time to buy because of the following factors;
- Low interest rates! Even if you don't have the best credit your interest rate is lower now than when I bought almost 20 years ago with decent credit.
- With closing costs for a home purchase falling almost completely on the seller, you can potentially save thousands of dollars in closing cost.
- With lower home prices, and your property taxes based on the sale price, your tax base is quite a bit lower now. If I had to pay the taxes on my same house, had I bought in the prime market value time, I would have to give up my house because I couldn't afford to pay the taxes.
The trick to ownership is to get yourself into a housing market area where renting doesn't make sense. If rent costs as much as a house payment, why rent? Look into lease options, they might be more of a look at a good neighborhood. As the price of rent climbs (and it will climb), ownership will be a good option down the road.
Don't get hung up on what state (or part of a state) you just have to live in. I've seen some beautiful homes in great areas for far less than I would have to pay in California plus there are great jobs in far less densely populate areas.
I purchased my ome in 1999 at a fixed rate of 6.5%and refinanced 3 years later also for a fixed rate (5.5%). I would have loved to take cash out but realized that would have been a bad move because I was trying to secure a better future, not interested in any imediate gratification thing. I watched others' rates rise while mine stayed at a reasonable rate. I now pay over $100 per month LESS than when I first purchased it. Yes, I have a second but even that plus my first is slightly less than original. I played it smart.
Smart people think of these things. The banks should be smart and, for just $1,000, refinance some of the mortgages at a 6% to 7% fixed rate. Then, they could turn potential forclosures into viable sound loans. Maybe average Joe could prove to be just as smart and not get too deep in debt. Big brother needs to be giving in these times. They'll have plenty of time to make up for these "GIFTS". Just think of how people would start spending their extra cash. Did someone say MORE JOBS?
Unless your are an itinrerant worker moving frequently from city to city for work (like I am, which I am a Contract Job Shop engineer), in the long term, especially with the very low long term interest rates, it makes more sense to buy rather than rent.
So even if home prices decline say 4-5 percent a year, you will pay out far more in rent than the decline in the home price. Usually monthly rents are calculalated at about 1 percent of the homes, or apartments value. Say, on a $ 120,000.00 house in the Midwest, that calculates out to $ 1200.00 a month in rental costs, and you get no Income Tax breaks in renting, whereas if you buy, you can take the Mortgage Interest deduction, the Property Tax deduction, etc.
So, if you are willing to hold on long term, it is even still best to buy rather than rent. I suspect that things will turn around in 4 to 5 years time, and housling prices will start rising agian.
I disagree with Someone's reasoning for home ownership, equating it with a necessary element for financial security. Living within one's means is #1 and all too often over the past decade this has been jeopardized by home ownership itself. While the primary blame falls on buyers, some responsibility has to fall on lending institutions (and the federal government) for creating no income verification "liar loans," negative equity, crazy helocs, 80/20 interest only products, etc. In many cases they preyed upon ignorance and greed and now we're paying the price. You want financial security? #2: Marrying well once (or not at all!) #3: Make yourself employable/get an education and #4: Avoiding self-destructive habits (addictions, crime).
in our future!
Last year I got a job that pays enough for me to finally move out of my parents' house and be able to buy my own home, but why bother? I rent an apartment and I don't see that changing any time soon. Why buy a house and see the value keep dropping? My sister and my brother-in-law almost lost their house because his pay was cut in half and they struggle to pay the mortgage on a house that isn't worth it anymore. This economy is such a joke. We should get used to this. Nothing is gonna change for the better for many years to come.
As an owner when you pay off your mortgage you have equity that you can sell,
as such when you retire you have choices that otherwise you could ill-afford.
In today's economic climate these are options that must be definitely considered.
From reading many of these comments I can see why so many people are broke.
Face it, EVERYONE pays property taxes, insurance, and maintenance, both RENTERS and OWNERS. Renters don't see these costs directly, but you have to be a fool to think they aren't all built into your rental payment. This is the only way property owners can turn a profit, they build all of these costs in, plus probably some mortgage interest, plus a profit for themselves.
You pay rent forever, if you are smart you buy a house that you can easily afford and pay it off in less than 15 years. I will have my house paid off by the time I am 45 years old (2 more years). I'll be paying about $250 per month on property taxes and insurance thereafter, while the 'genius' renters will be paying $1400+ for a similar house in my neighborhood.
Only broke people think a lifetime of renting is smarter than owning.