When commentators began to suggest that the US housing crisis had changed people's attitudes towards housing; turning the US into a nation of renters, many took the potential for this being a "possibly permanent" change with a large pinch of salt. But few would have predicted that the commentary would be reversed so quickly.
Already there is abundant talk of the changing attitudes toward home-ownership, and how it raises questions about the future demand for expansion of single and multi-family rental capacity. But the desire to buy a home is something quite different to having the means to do so; the former can swing with the winds of sentiment while the latter is much harder to put into reverse.
It has long been called the American dream to own a home with a white picket fence, and during the boom the abundance of credit made it almost criminally easy for anyone who so desired it to achieve the dream of owning their own home. The credit crunch - sparked by a US housing crisis severe enough to precipitate a global financial collapse - put paid to that.
Since the financial crisis blew up in our faces first time buyers in America have found it nigh on impossible to get a mortgage and, despite record low house prices were forced onto the rental market. Here they were joined by the millions of people losing their homes to repossession and those who choose to rent anyway. This created a massive rental boom as the commentators talked about a generation of renters, a lost generation of buyers and the US possibly being forever changed into a nation of renters.
Recently the American housing market has entered a period of recovery, and according to one major survey the subsequent positive breeze in sentiment has once again changed the mind-set of the US public from predominantly favouring renting to once again predominantly aspiring to buy. However, according to another survey there has been no such change, and in any case, it will take a lot more than positive sentiment to get home ownership figures back to anywhere near their pre-bust level.
A national Gallup survey released last week found that most Americans own a home and plan to continue doing so (56 percent), or don't own a home but plan on buying one in the next 10 years (25 percent). Eleven percent of Americans don't own a home and have no plans to buy one, and 3 percent own a home but plan on selling it and renting in the next 10 years.
Meanwhile a massive study including a survey and 10 focus groups found the opposite. The study, conducted by Haart Research for the Macarthur Group found that:
There's been a seismic shift in renting versus owning. Some 57 percent of adults believe that "buying has become less appealing," and by nearly the same percentage (54 percent), a majority believes that "renting has become more appealing" than it was before, producing a net shift of 60 percent.
Nearly half of current owners (45 percent) can see themselves renting at some point in the future.
Homeownership is no longer synonymous with the American Dream. Three in 5 adults (61 percent) believe that "renters can be just as successful as owners at achieving the American Dream." This sentiment is broadly felt, among owners (59 percent) as well as renters (67 percent), and across all regions of the country.
Ownership is no guarantee of housing stability. Nearly half of all respondents (45 percent), owners and renters, have experienced a time in their life when their "housing situation was not stable and secure."
So who's right? The truth is it is too early to say.
According to the U.S. Census America's home ownership rate has declined from a peak of nearly 70 percent before the crash to roughly 65 percent today, while the share of renters has increased only slightly from 34.1% in 2009 to 35.4% in 2011. But according to the aforementioned Gallup survey the share of renter households increasing from 22 percent to 34 percent between 2006 and today. Meanwhile the rate of home ownership among younger Americans has declined at substantially faster clip, dropping from around 43 percent before the crash to roughly 37 percent today. Projections by the Urban Land Institute suggest the home ownership rate may fall back to as low as 60 percent over the course of the coming next decade.
But it is one thing being forced into renting, or being unable to buy, it is another to have your attitudes towards renting or buying changed forever. That said nothing can make you see something in a new light than being forced to give it a try.
It has been argued that this change in the housing market forced the wider public to consider the arguments for renting as a choice as oppose to buying. Numerous studies have argued that home ownership stymies the flexibility of the labour market and the economy by tying home owners to their location and making it harder for them to pick and move to jobs and economic opportunity. Three-quarters of respondents to the Haart study said that "moving to a new city or state for a job is more likely now than it was in the past".
A majority of Americans also say home ownership has lost its economic allure as an investment for the future. Nearly seven in 10 Americans (69 percent) report that "it is less likely for families to build equity and wealth through homeownership today compared with two or three decades ago." Most of all, three in five adults (61 percent) believe that "renters can be just as successful as homeowners in achieving the American Dream." This sentiment was felt among more than half of home owners (59 percent) and more than two-thirds (67 percent) of renters.
The American dream has been the American dream for a long time, and has survived many a rough patch in terms of sentiment, but at the same time globalisation is becoming a reality and more people than ever before are moving around to find the best jobs. Time will tell which of these mind-sets will prevail in the American housing market.
- Friday 26 April 2013