Is Grant Cardone right that the US will become a renter nation?

Question

According to Pew, "investors bought 24% of all single-family houses sold nationwide last year, up from 15% to 16% annually going back to 2012, according to a Stateline analysis of data provided by CoreLogic, a California-based data analytics firm. That share dipped only slightly in the first five months of 2022 to 22%."

Is this really a good thing for communities?

Harry McNamara · Answer

Let's be honest. It's bad for communities. Owning a home creates a pride in your ownership like no other. People who own their homes, whether they are million dollar properties or trailers will do more to upkeep the property, add curb appeal, continue regular maintenance, and care for their community as a whole in the long term due to their investment in the area.

We are moving toward a rental model on pretty much everything you can put your hands on. Don't forget Klaus Schwab of the World Economic Forums infamous comment. "You will own nothing and you will be happy."

The best we can do as real estate owners and investors is to care for our properties, and for our tenants as best as we can, because massive corporate landlords sure won't.

Dave Meyer · Answer

This narrative is somehow gaining traction, but is not supported by strong evidence. One just needs to look at the home ownership rate in the United States, and it tells a very clear story. It's not a mystery, you can see for yourself that this is not the case.

Homeownership in the US has stayed between 63 and 69% over the last 55 years. As of the last Census reading its about 66% -- right smack dab in the middle of that range, and trending upward at least as of 2021 (might be down in 2022). It is true that the share of investor purchases is up -- and if that continues, it could impact homeownership in the US but that hasn't happened yet and the idea that we're a renter nation at this point is just not accurate.

Tristin Crum · Answer

As homeownership becomes less attainable I think that lower income individuals will remain renters for life which is unfortunate because of the clear wealth disparity between homeowners and renters. This is especially true in HCOL areas such as the West Coast. Only being required to put 3.5% down doesn't matter much if a starter home is $400,000 to $700,000 and is completely unaffordable to those trying to enter the market from the lower to middle lower economic status. I do not think that broadly individuals will not want to purchase or own a home, I think it will simply not be possible for many without the help of family. I do not foresee housing prices coming down in any significant way in the long term as we still have a large inventory shortage. My buddy is an analyst and recently sent me a report he had written and this is an interest paragraph from his analysis.

"There is still a huge housing supply problem in the United States given 37 million people between the ages of 24-37 don't own a home. This is because 27.1 million homes were built between 2000-2009 but the Great Recession derailed the pace of home building by almost 80%. Only 5.8 million homes were built in the United States between 2010-2019 by comparison. The homes for this next generation of buyers were never even built. Ultimately the last housing crash will prevent another actual crash from occurring in the United States based on the sheer lack of supply. Even if mortgage rates hit new highs, it won't fix the supply problem. It will just temporarily reduce demand which is what the market is already experiencing. If mortgage rates materially drop from here, it's not outside the realm of possibility we could go back to bidding wars. Certainly some buyer incentives, such as closing cost credits and seller rate buydowns, could start to dry up as more buyers enter the market."

In short, it won't be by choice for the majority of individuals who do not purchase a home, they simply won't have access to the market because of their personal financial position. I have heard Grant argue that people WANT to be renters, some do, I don't believe the majority of the population want to be renters.

Jaron Walling · Answer

I don't think it's a good or bad for communities but as an investor that bought a SFH this year I'm part of it. The term "renter nation" bugs because I rented houses for 8 years before sacrificing, saving, and buying my first distressed dump of a property.

Bruce Woodruff · Answer

I believe the main change will be that people will migrate to the areas where they can afford to buy. Home ownership is an innate drive for lots of people. A lot of these millennials will wake up in a few years and start scrambling to find places to buy......IMHO...

Eliott Elias · Answer

With the current interest rates and recession coming it's tough for people to buy, we are in a shortage of rentals and need investors to provide more inventory

Bruce Woodruff · Answer

Many will, not all. Most people I know are relocating...but mostly due to politics, not money, the money is a bonus. You can already see the Red states growing and adding population, house seats and electoral college votes. It will be interesting to watch this country change.....IMHO.

James Hamling · Answer

Is the US becoming a "renter nation"? This is old news, very old news, the answer is yes, 100%, and the US has been on this path for years now, it's just now finally hitting a point where awareness is coming public of such.

Is this good for communities? Well that's a bit like asking chicken or steak isn't it, it's an opinion question and persons opinion of such will vary depending on how it impacts them.

Is Walmart good for communities?

This shift that we are in for housing compilation, yes it's very similar to the emergence of Walmart in retail, and how it reshaped everything. This is a corporatization of the SFR (Single Family Rental) market. It's a very big market, trillions upon trillions in real estate, so the shift will be, and has been, many years in the making but it is absolutely happening and ain't nothing anyone can do to stop it.

Yet another "new norm".

Walter Correia · Answer

@Amy Raye Rogers

He is absolutely right!!!! The flaws in our current monetary system is promoting all this. Affordable in anything will continue to be an issue unless we level out the monetary playing field.

Nick Robinson · Answer

@Dave MeyerExactly and if you look at the current data % of homes bought by investors just dropped dramatically. Over the past 2-3 years especially we have seen a buying spree for investors of rental properties. I think this craze has not only slowed down but to some extent will work in reverse. Companies like BlackRock do not look at property the way you or I do they treat it as a stock. You probably have the number on the top of your head, but I believe the avg CAP over pandemic was 4.5-5%? If they can pick up a 1yr UST and make 4.75% and not hassle with tenants, property management etc. they will probably take that option. Not to mention it is a cash like instrument making it extremely liquid. Even though they bought these properties with "cash". That cash was most likely margin. With exposure to FTX and the avg bear market in stocks bringing the S&P to around 3k-3.2k, I think much worse based on yield curves, they may have margin calls and will need to liquidate their positions. This is speculation because no one knows how much leverage is in the system.

The other place you will find supply is through AirBnB. I have been saying it over the past 2 years and over the past couple of months it is becoming more evident some investors put the cart in front of the horse. 50% of all AirBnB's were bought over the last 2 years and I would be willing to bet none of them work as LTR. With the community seeing less bookings and going into recession I expect to see more pain to these owners and we will see how long they can hold out.

Even just these two factors will increase supply and if rates stay high, which once again based on history and yield curves I expect to fall, the affordability will decrease the demand for housing. Even if the FED cuts rates you can look back in history and find that is not a good thing. The markets and economy fall after the rate cut.

Is Grant Cardone right that the US will become a renter nation?

Is Grant Cardone right that the US will become a renter nation?

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