Several writers and economists are arguing that the current economic malaise is turning the tide against home buyers and homeowners.
In last week's Barron's (dated July 24th), Gene Epstein argues that the recession and shifting demographics will swell the ranks of renters and curtail those of home buyers.
"Most U.S. households own the dwelling they live in, and that isn't likely to change. But demographic and economic forces, together with some perversities of government policy, are combining to push the share of ownership back to where it was in the early 1990s. Already, in the wake of the housing bust that brought on the Great Recession, the share of U.S. households owning homes has slid steadily--from 69% at its peak in 2004 to 67.2% in this year's first quarter. And the rate is likely to fall to its 1993-94 level of 64% by 2015.Epstein also points to tighter lending standards, which now that Fannie Mae and Freddie Mac are wards of Uncle Sam has reached ridiculous levels.
"The flip side of this trend is a rising rental rate, which probably will hit 36% by 2015, versus 32.8% in 2004. Every percentage-point increase represents nearly 1.3 million households, and the average household includes more than two people--so roughly 10 million extra folks could be moving into rentals over the next five years.
"Why? From now through 2015, the long slog that will unfortunately characterize the economic expansion will bring slow growth in jobs and wages. That pace of improvement should be just strong enough to permit new households to form, but not robust enough for the members of those households to afford to own homes. In addition, lax lending standards, fraud and predatory lending practices-- key factors in the unrealistic bubble in home ownership in the mid-2000s and the subsequent debacle--appear to have become rarer, at least temporarily."
Last week, the Dept. of Housing and Urban Development announced it would be investigating claims made in a New York Times story that lenders were denying loans to pregnant women and new parents, based on the crazy idea that their short-term disability income didn't count, even if they had a firm job to go back to or even if they were receiving the same salary.
None of this is good news for the folks who make their living building, buying, selling, inspecting and financing real estate. In fact, for builders, whose new home sales were nearly 17 percent lower in June compared to a year ago, the news could hardly be worse.
Calling all real estate investors.....
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.