When Bad News is Good
Homeownership has hit a 19-year low, according to the Census Bureau. The share of Americans owning a home is down to 64.9%. Meanwhile, the median monthly asking rent has soared to a record high, hitting $766 as of the first quarter of 2014.
Because our bread is buttered by homeownership, it would seem that ownership hitting a 19-year low is reason to lament, especially if we consider that many pundits believe the trend will be sustained. One prominent pundit, Sam Zell, chairman of apartment REIT Equity Residential, believes the homeownership rate will eventually fall to as low as 55%.
We don't quite see it that way.
For one, continually rising rents is good news for housing, especially if the rate of home-price appreciation continues to ease. This would mean that owning a home will make more sense economically to more people.
The simple fact people prefer to own than to rent is also reason to be encouraged. People prefer to live in a neighborhood of owners, because these neighborhoods are usually more stable and better kept. The good news is that if you can satisfy your preference at a comparatively better price, you're more likely to act. We expect to see more people act as the advantages of ownership become more apparent.
The U.S. homeownership rate peaked at 69.2% in June 2004. We don't see a return to that level in the near future, but something in the 65%-to-66% range is entirely reasonable and plausible.
Courtesy of Jessica Regan.
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