The flood of next generation renters could mark the beginning of a new form of the American Dream.
The economic recession, paired with more stringent loan requirements and a smaller population of people in the age demographic of home owners, is serving to help expand a burgeoning rental market.
This switch from home owning to renting represents a subtle shift in the manifestation of the American Dream.
Inman News reports:
“Most renters who plan to become homeowners say it will be at least two years before they make the leap, and more than one out of four renters say they’ll never buy a home, according to an online survey by Harris Interactive”.
And why would they want to leave the rental market?
Owning a home requires stability and ties up cash. There are maintenance costs on top of monthly payments and ultimately (as many people are unfortunately finding out) there is no guarantee that a home will increase in value.
Furthermore, while the reasons for staying in the rental market increase, the ability to leave is actually declining.
An article by Gene Epstein for Barron’s (a member of the Wall Street Journal Digital Network) states,
“According to the Federal Housing Finance Agency, the share of new mortgages requiring a down payment of less than a 10th of the house price was 8% last year, down from 29% in 2007.” (emphasis added)
For current renters looking to buy this can represent a major hurdle to overcome. Epstein goes on to further explain that last year the average down payment on mortgages exceeded 25%.
The housing market will also likely continue to decline in part due simply to a smaller demographic of individuals in the age range of home buyers. In the next five years there will be more 20-to-34-year-olds than 35-to-49-year-olds, which will likely continue to spur on the growing rental market while simultaneously slowing the already flagging owning market.
Policymakers will likely consider these factors as they reevaluate the $230 billion spent on government subsidies for homeowners spent last year in relation to the $60 billion in tax breaks and federal spending in the rental market.
A boom in the housing market now would not represent the balanced economic growth it did in the fifties, as the things that now fill homes across America are largely imported from foreign markets. Growth in the housing market does not translate to growth in other economic sectors as it once would have.
Perhaps this shift from owning to renting, slow though it may be, does not represent the dramatic swing away from the American Dream that it appears to.
It may represent the beginning of the end of the idealized white-picket-fence-in-the-suburbs for some Americans, but surely that is not the only manifestation of the American Dream.
After all, the American Dream is ultimately to live a more prosperous life than our parents and to provide for our children a better life than we were given.
The gradual move from owning to renting may just be the 21st century manifestation of the American Dream, as renting could allow for greater prosperity in our time than owning could.