Renting More Appealing, Says Fannie Mae Survey

Posted by Teresa on September 25, 2010 under Housing Trends | Be the First to Comment

A new survey by Fannie Mae reveals that the goal of home ownership is losing its appeal for Americans. Falling home prices, foreclosure and financial ruin is enough to make the strongest homeownership desire  fade, as evidenced by the falling number of people who say they consider housing a safe investment.

The percentage of Americans who though of housing as a safe investment was 83% in 2003. But by July of this year, it has fallen to 67%. That’s three points lower than January 2010. And, while more Americans (70% in July vs. 64% in January) believe home prices are nearing the bottom and it’s a good time to buy, the number of households saying they’re more likely to rent than buy rose from 30% in January to 33% in July.

Why Americans are Renting
If home prices are falling and mortgage rates are near 50-year lows, why wouldn’t more people be lining up to buy homes, rather than rent them? First, tighter lending standards. People simply can’t qualify for mortgages like they could in the free-flowing days of the early 2000s. Second, the still-stagnant labor market is keeping people from taking on more debt; those with jobs are paying off debt and tightening up on spending. Third, even if they did qualify for a mortgage, people think they cannot. In fact, more than 50% of renters believe they cannot obtain a mortgage to purchase a home.

Younger people are taking a wait-and-see approach, according to a Wall Street Journal article on the rental market. Where once they might have purchased a condo, they are renting for the long-term foreseeable future. They’ve seen friends become “stuck” owning homes they cannot sell, unable to move and take advantage of job opportunities. And, they see homeownership as an “economic trap.”

Economic analysts say these changing attitudes could lay a “more stable foundation for the housing market,” as Americans see homes as a durable good, like a car, and not an investment. And it’s good news for landlords, who could be enjoying lower vacancy rates in the future!

U.S. Government Shifting Policies to Assist Renters?

Posted by Teresa on August 12, 2010 under Housing Trends | Be the First to Comment

Politicians and federal policymakers don’t always agree on how to best serve the U.S. economy and needs of taxpayers. One thing everyone can admit is that Freddie Mac and Fannie Mae nearly collapsed in the recent housing crisis, with a huge loss of taxpayer money.

Some critics think an overhaul of the mortgage giants is in order; how long, they ask, can the government sustain guaranteeing 90% of mortgages? Others say the U.S. needs to shift its emphasis away from a goal of “homeownership for all.”

Homeownership in the U.S. fell to its lowest level in 50 years and projections say it could sink even lower. It’s now at 67% and is predicted to drop to 62% between 2012 and 2020, as millions of homeowners lose their homes to foreclosure. Massive government subsidies in the form tax breaks on mortgage interest and avoiding capital gains taxes incentives have not prevented the foreclosures millions of Americans are facing.

Now, government-sponsored home ownership incentives are in question. Some say the policies are outdated and have encouraged overinvestment in housing. The Treasury Department says it’s moving toward big changes—including promoting affordable housing for owners and renters alike. More rental housing assistance for lower-income and senior citizens could be on the way, too.

• Government subsidies for home owners in 2009: $230 billion
• Government subsidies for rental market in 2009: $60 billion

Experts say there are many advantages to renting over homeownership. It’s easier to move in search of work, for example. Right now, many families are “stuck” in homes they cannot sell and therefore cannot take advantage of employment opportunities in other cities or states. The lower cost-of-entry into rental housing allows people to save more money, too. Home ownership is expensive, and not always a wise investment.

Landlords could be seeing more qualified tenants, as rental housing assstance becomes more available to folks who need it.