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A Nation of Renters? Not Necessarily

solomonsuccess logo and graphicAmong the wise words of King Solomon’s proverbs are many exhortations aimed at young people, urging them to behave prudently, listen to the wisdom of their elders, and lay the groundwork or a prosperous life in the service of God: “My son, hear the instruction of thy father, and forsake not the law of thy mother.” ({Proverbs 1:8) For young people today, that advice hasn’t changed. And amid concerns voiced by experts in the housing industry that young people are choosing to rent on a more or less permanent basis, rather than buy homes, it turns out that the so-called :millennial: generation may actually want to buy into that traditional “American Dream” after all.

As the nation’s foreclosure crisis drove a number of homeowners into becoming renters, and numerous potential homeowners dropped out of consideration because of credit and employment problems, the pool of semipermanent renters continued to grow. Add to that retirees and professionals on the move who choose to rent, and it appeared that fewer and fewer people outside of investors were committing to buying a home.

But among millennials – young adults between the ages of 18 ad 34 – the desire to own a home remains strong, a part of the traditional American dream that 93 percent of those surveyed said they wanted to share in someday. These young people may have lost faith in the stability of the housing market and the economy as a whole, but they expect that things will improve by the time they have the means to actually buy a house.

Some of the uncertainty about home buying in this age group stems from the housing collapse of 2008, when mortgage defaults send massive amounts of homes into foreclosure. These young adults may have seen their parents or relatives struggle to keep afloat – or cope with foreclosure. Saddled with massive student loan debt and faced with an uncertain employment picture, they may simply not have the credit or assets to buy.

This generation also believes that if not now, then later, homeownership will be within their reach as they find more stability in careers and locations. They expect that mortgage rates and home prices will stay low into the foreseeable future, and that their ability to qualify for home loans will only improve.

But those expectations could change – and with them, the whole picture of millennial homeownership. If the economy remains stagnant, with limited job growth, this group may not find the job stability they need to pay down debt and qualify for mortgages. Rates may go up; the Federal Reserve has taken steps to keep rates at this artificially low level to around 2015, but the picture becomes blurry after that. And, the inventory of available homes at low prices may be limited.

For now, the American dream for most of these younger workers is just that – a dream. The majority will remain renters at least for a while, fueling the rise in rent sad demand for rental housing that boosts the prospects of income property investors pursuing their own version of the American dream with Jason Hartman’s guidelines for creating wealth from income property investing.

 

The Solomon Success Team

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