The US home ownership rate continues to decline

10 Replies

Home ownership at a 19 year low.

Of course home ownership rates declined during the mortgage/foreclosure crisis, but they are still dropping now in the housing recovery. Below 65% now. Down from nearly 70%. That is 15,000,000 new people in the rental market over the past several years.

I would think that home ownership rates would have bottomed out and be on the rise now that housing and the economy are well into recovery. Not so. In fact, Sam Zell says that because of deferred family formation, home ownership rates will decline to 55%. Think about that; another 30,000,000 Americans renting. I'm not sure I believe it, but the implications for real estate investing are beyond profound.

Do you agree with Zell? How will this trend affect your long term strategy?

Im also guessing that the figures only focus on proportion of owners compared to renters as opposed to proportion of sales taking place. Seems like high sales activity are being done by the same group of persons.

I buy to hold, with intention to build and hold, this can only mean there will always be a demand. My focus was on the elderly but it is good to know I may have a back up market as well.

The problem with best rental locations is a possibility of rent control. New builds eliminate that problem.

For my business that would be great.

I prefer to fix-and-flip instead of buy-and-hold, so I don't like this trend. But the population is still increasing, so I think that this will eventually settle out.

While it appears as if renting would benefit greatly from the trend, there's also the possibility that household formation is also dipping - people aren't moving out of mom and dad's house period, whether into a rental or their own home.

I posted an article about Zell's comments the other day and it had some good comments. http://www.biggerpockets.com/forums/99/topics/126438-sam-zell-says-homeownership-will-fall-to-55

I think a statistic that plays a huge role in homeownership rate is the labor participation rate. Which has been dropping more or less steadily since the dotcom bubble burst and dramatically since 2008. It just suffered a major monthly drop (800K) which was somehow not headline news.

Originally posted by @Cal C. :
I posted an article about Zell's comments the other day and it had some good comments. http://www.biggerpockets.com/forums/99/topics/126438-sam-zell-says-homeownership-will-fall-to-55

I think a statistic that plays a huge role in homeownership rate is the labor participation rate. Which has been dropping more or less steadily since the dotcom bubble burst and dramatically since 2008. It just suffered a major monthly drop (800K) which was somehow not headline news.

I saw your thread after I started this one some excellent thoughts there. It's obviously a complex issue, that varies even more depending on area.

If that is the case, it seems buy and hold would be the best strategy at this point?

Originally posted by @Joseph Caracappa :
If that is the case, it seems buy and hold would be the best strategy at this point?

I don't think there is a single best strategy, but buy and hold in an area of job/population growth seems prudent. The trend is your friend.

Come on to Jersey. Manhattan and Philadelphia city folk making big bucks are looking for suburban homes. My flips are full of fluff and they sell like hot cakes. My rentals are also full of fluff but designed for those that would rather play golf, drink and socialize at night instead of saving for there own home they could/would never take care of anyway. Is NJ expensive "Hell Yea" but it is because of simple supply and demand. I just buy low repair to the nines (in budget of course) and let it ride.... Sounds silly but in reality that is what it is like. I manage my businesses like you would not believe and whenever I think things cannot get more out of wack they do. The professionals today can create a drone that can find a pimple on my butt at 2:00 am when I sleep in my own bed with the blinds closed but they cannot tie there own shoes. That is my opportunity.

Thanks for that mental image - NOT.

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