For the first time in eleven years, the rate of home ownership has fallen to a mere 69.9% for the second quarter of 2010. This is down from 67.1% the quarter before and down a whole percentage point from this time a year ago. These surprisingly low numbers indicate a trend occurring nationwide, with renting on the rise as fewer Americans are able to afford their homes in the wake of the financial crisis. Additional statistics show that home prices rose by 1.3% in the month of May alone, which could account for the increased percentage of Americans choosing to rent rather than buy their homes. Despite government programs aimed at encouraging homeownership, trouble still seems to plague the housing market.
Government programs are more focused on home ownership than renting, as has been the case since the days of Herbert Hoover's presidency. In the later 1920s, government programs were initially created because the federal government believed Americans would have a bigger stake in the country if they owned property as opposed to simply renting the property in which they resided. The Great Depression caused an increase in such programs, this time out of necessity, hoping that giving homeowners a break on their mortgages would allow more people to remain in their homes despite some of the worst economic times the country has seen, when half of all mortgages nationwide were in default. Today, one of every 411 housing units received a foreclosure filing. Despite some successes due to government loan modification programs, the amount of people defaulting on their mortgages is staggering.
In the five-year period between 2004 and 2009, the number of renting households increased by 3.4 million, or 10%, according to a study published this year by the Joint Center for Housing Studies at Harvard University. This nationwide trend demonstrates an increase that transcends the housing struggles of states like Nevada and Florida, where record-high housing markets saw the greatest collapse once the market turned in 2008.
Practically speaking, oftentimes owning and renting end up costing the same on a daily basis. While homeowners don't have to pay rent to a landlord, they do pay taxes and maintenance costs that renters don't have to worry about. There is the argument that owning a home is a long-term investment, one that holds value in and of itself because of the financial stability provided once a mortgage is paid off. Where homes used to be considered an investment for the future, many now view them as a risk to credit and overall finances, opting instead for a temporary, shorter contract as opposed to a binding mortgage.
Current demographics in the nation encourage renting as well. Baby boomers now looking to downsize may opt for an apartment or other rental property, and a record number of college enrollments contribute to this trend. Additionally, many Americans simply don't believe that the economy is improving - at least not yet - and choose renting as a safer option until the housing market stabilizes.
The underlying point in these trends and statistics is that the view of what it means to be a homeowner is changing. Long considered almost a civil duty, owning a home is now seen as an option that may be the best for some, but not all. Unlike under the Clinton and Bush administrations that emphasized the need for homeownership, the Department of Housing and Urban Development is taking a new stand on homeownership, one that understands that not everyone is meant to own a home. These changes have initiated a new outlook on what homeownership means to the American Dream. Washington has made note of recent renting statistics, with many in the federal government arguing that the recent housing market crisis proves the need for more renting. Though the Obama administration has yet to make major moves towards encouraging renting, experts agree that with significant numbers hinting at a changing view towards renting, the government will have to take notice sooner rather than later.
-Andrew R. Martignetti, Esq.
Information in the above article is for educational purposes only and does not create an attorney-client relationship. You should not construe this to be a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel.
