When we sold our house in 2005 and moved into a rental, we were asked by concerned friends, “Are you doing OK?” Obviously you wouldn’t be in a rental unless you were in financial straits. In 2006 when we launched Doom, I couldn’t convince reporters that I wasn’t either “bitter” or “priced out of the market”. [I never could figure the latter out. Lenders were passing out loans to anyone who could fog a mirror. How could anyone be priced out?] I suspect most fellow “voluntary renters” kept that fact secret if they could.
Five years later, the world has changed. Home sales are down, renting is up, and now “renting by choice” is not only respectable, but growing in popularity.
“We have more of what we call ‘renters by choice’ than I’ve seen in the 40 years I’ve been in the apartment business,” said Jeffrey I. Friedman, chief executive of Associated Estates.
For decades, the company has asked former tenants why they were moving out. During the housing boom, as many as a quarter of those moving on said they were buying a house. In 2009, the percentage of new owners fell in the first quarter to 13.7 percent, the lowest ever.
Last year, as the economy improved, the number rebounded. This year, it fell back again, to 14 percent.
Builders clearly believe that the future includes many more renters. So far this year, construction of multiunit buildings is up 21 percent compared with 2010, while single family-homes are down 22 percent. Sales of new single-family homes are lower than at any time since the data was first kept in 1963.
Pending home sales last week were down 27% YOY, indicating that for many, home ownership has lost it’s luster. The WSJ said:
Housing is locked in a downward spiral, industry analysts say, not only because so many people are blocked from the market — being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage — but because even those who are solvent are opting out.
“The emotional scars left by the collapse are changing the American psyche,” said Pete Flint, chief executive of the housing Web site Trulia. “There was a time when owning a home was a symbol you had made it. Now it’s O.K. not to own.”
Homeownership will undoubtedly regain its luster when prices have stabilized and people are more confident about their employment. In the meantime, renting seems to have lost its stigma, and has become a viable choice.
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Is the curtain coming down? Are we in the final act? Is the anti-doom, whose long awaited arrival has been predicted each year of the last 5 by pundits, politicians and especially our realtor friends, finally on the horizon? The Economist, page 32 (“The darkest hour”), with a cool Twist -like graph, shows the ratio of housing prices to rent is now “normal”. Bear in mind that wonderful magazine has long been the gold standard for some of us, having shown (again in graphic form) the housing bubble well over a year before this site was created. It provided me with the first data pushing me out of home ownership status in 2006. All credit goes to you and John (and a legion of irrational sellers) for keeping me out for 24 months, since I was “part of the problem”, willing to buy a home even in an area in which I clearly did not want to live (AZ) because I really hated renting
. So, even The Economist is now discussing “shadow demand”, not just shadow inventory! Has that bastion of honest international news and common sense been taken over by morons, or worst yet, mortgage brokers, or are we approaching the end of housing doom? At least here in Florida we can expect spendthrift local governments and State sponsored insurance to raise both taxes and insurance rates enough to keep the market tipping towards a double dip.Heck, my assessor just raised the value of my house, so it must be true, right? Tell us it ain’t so Twist, but give me a graph or two, not just interesting opinion about attitude changes in America! Stop me, before I invest again, since those FDIC insured funds barely yield postage these days, I’m lusting for land again. Something nice in the Midwest hills to escape hurricane season down here perhaps. Help!! .
case shiller results are out, and yet again, un like the rest of the country, Washington DC prices rose, now standing at a value of 183.
2 years ago, when prices bottomed out in DC at 165, people here and elsewhere told me to wait as it was simply a blip, and better deals are on the way. At what point, if ever, do we conclude “i guess that was the bottom”, and even worse, how much higher will prices be then?
Rent vs. Own is certainly not in equilibrium where we live (northern california). There’s a ton of new condo/townhomes across the street that are poorly constructed, and have really strange layouts so that different floors and walls share with multiple neighbors – ie, they’re likely very noisy. Buying one of those would be easily double what rent is in the very nice apartments across the way.
We had gone over there and looked at the models a couple of years ago, out of amusement. I really wish I’d kept the flyers; I recently saw signs up saying one of the developments was in the $400k’s – we’re pretty sure those were going for $700-800k 2 years ago.
For me, one of the more personal lessons of the housing boom and crash was learning there was such a stigma against renters at all. I grew up in a rented apartment, and as adults both my sister and I have always rented, as many New Yorkers do. Yes, we grew up poor, but it seems people have lower opinions of renters of any economic strata than they do of the poor! I’ve never heard such invective and never realized the contempt that some homeowners had for renters, as well as the high regard they reserved for people such as themselves. I thought when I resisted getting an easy loan to overpay for a cramped condo, I was being prudent, but to many people I was bitter, paralyzed by fear, and locked forever into a life of poverty. And even the crash hasn’t convinced them otherwise. One friend whose house has gone up slightly in value raves about the financial benefits of owning, without accounting for the fact that her parents gave her the down payment and have been paying her mortgage for several years now. Yeah, of course it’s 100% profit when you don’t have to invest a dime. If she had to spend her own money, she’d still be renting.
Hard economic realities have a way of changing even the most ingrained prejudices and attitudes. We’re seeing this right now in the change in attitude towards renters and we’ll see it even more as people are forced to adjust to new economic realities in America.
Old SMike-
For the past couple of years I’ve worked grading standardized tests in the spring. I’m gone most of the day, so my posts are pretty simple this time of year. I was working on that chart with graphs last night though.
Unfortunately the drought in Texas has sent the scorpions inside, and I was stung for the second time this year yesterday. It wasn’t that bad, but the Benadryl knocked me out. I’m afraid it’s put off that post, as well as the one where we celebrate our FIFTH ANNIVERSARY [John, did you ever think we'd be still watching this mess five years later?] today.
I’ll be back this evening. : )
Sorry about the sting Twist, I’ll never forget the realtor who told me those scorpions running around inside the new Mesa mansion I was looking at were “normal”, kind of like roofs that leak when it rains. At least now my major pests are crazy Canadians (sorry John, but don’t they ever drive in traffic up there!!), hurricanes or those cute, harmless lizzards the dog loves to chase.