Rise in Renters Erasing Gains for Ownership

[FarCenter]

Source: New York Times

By RACHEL L. SWARNS -- Published: June 21, 2008

WASHINGTON — Driven largely by the surge in foreclosures and an unsettled housing market, Americans are renting apartments and houses at the highest level since President Bush started a campaign to expand homeownership in 2002.

The percentage of households headed by homeowners, which soared to a record 69.1 percent in 2005, fell to 67.8 percent this year, the sharpest decline in 20 years, according to census data through the end of March. By extension, the percentage of households headed by renters increased to 32.2 percent, from 30.9 percent.

The figures, while seemingly modest, reflect a significant shift in national housing trends, housing analysts say, with the notable gains in homeownership achieved under Mr. Bush all but vanishing over the last two years.

...

For many minority and lower-income families who viewed homeownership as a stepping stone to building wealth and passing it on to their children, the transition from owning to renting has been the unraveling of a dream. Burdened now by debt and bad credit, some of these families are worse off than they were before they bought.

...


Read more: http://www.nytimes.com/2008/06/21/us/21renters.html?th&emc=th

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Of course, "the ownership society" promoted by the Bush adminstration was just as bogus as the rest of their programs.

Someone buying a house with no money down is not an "owner". They are a "debtor", or perhaps more accurately a "mark".

For example, someone buying a house for $300,000 with no money down, is not only not an owner, but is actually under water on the day of closing by the $20,000 to $25,000 that it would take to sell the house, given that the seller pays the real estate agent commissions and other fees.

[cobalt1999]

1. To be fair, if I was in the market for a house, I'd rent right now too.

Even if I had the money, I'd wait and rent. Why buy when you don't believe the market is at the bottom yet?

[asjr]

3. What has stunned me is that the houses

in my area for rent have risen in rates. It almost comes to gouging the renter. And I live in a small town in middle Tennessee.

[robinlynne]

4. same here in los angeles. rents have skyrocketed.

[haele]

15. The management company for our house informed the owners not to raise rent -

There has apparently been a serious increase in late rents for long-term leaseholders in the San Diego area since February - not "unpaid" rent but late. (Luckily, we haven't fallen into that category - yet) Enough so that the managers have been calling renters to remind them when rent is due. According to our manager, this has showed them that it's getting harder for the long-term renters to pay - pretty astute for a bunch of Bush-loving Conservative 'Pubbies.

Since this management company is not the best when it comes to upkeep, if a renter was to leave or be evicted because they couldn't pay the rent, it would take them a good three/four months before most of the properties can be rented out at a competitive rate for the surrounding areas. Even if they were to raise their average leases $300 - $400 after fixing up the place, they would be renting at a loss for a year or so to pay for the repairs that needed to be done to most of the properties to validate what they would charge.

And in today's economy, most of their prospective renters with good credit will be picky enough they wouldn't want to "make due" on a rather average WWII era "government family housing" tract home that might not be in "charming" or model home condition and pay the lease they would need to charge. They're going to get the struggling families (like us) or foreclosure families who will be just as "risky" renters as the ones they have now. Even at $300 a month more than what they're charging now - actually, due to local inflation, at $300 more a month, they risk more rent defaults and evictions.

As for our property - if we were to leave, it would cost them a good $12K at least to fix the place up to justify what we're paying monthly now - $1500. Plumbing - lawn (sprinkler and hose outlet) and bathroom (old toilet pipes can't handle the new low-flow toilets), drought tolerant landscaping (kentucky bluegrass and rye do not do well in this climate, especially with water restrictions), new windows (four windows have dry-rot and are falling apart in their frames, two are broken by the kidlet throwing things) new front security screen door, new carpeting, 2 "new" vintage interior doors to match the house - or all the doors replaced, wall repair (kidlet's room - she used to throw terrible, destructive tantrums) new painting - interior and exterior. Rat and gopher abatement. Probably tenting. New outlets (at least two) and re-wiring to old outlets in the bedrooms, kitchen and front room because we still have the old 1940's wiring in the house and some of it is deteriorating...Of course, the wiring and tenting can probably wait, the rest can't.

Those property managers and landlords who are gouging the renters to flip to higher rents at lease turnover are fools. From what everyone I know who has done property management or has rental property has experienced, the consensus is that you want long term, responsible "work with you" renters who still have enough left over to do the little upkeep things that they would normally do if they owned the property themselves. "In and out" renters, no matter how high the rent or classy the property, generally just trash a place before they either abandon it or you have to evict them.

Haele

[pattmarty]

2. Here's the "true" (liberal) story on the supposed Bush home.....

.....ownership deal; I have read that home ownership has been increasing every year since the end of WWII. This is another propaganda piece that the Bush Admin is putting out so the prick has at least some kind of "legacy". So really this is another of his "failures" since this has been the first time home ownership has fallen since WWII.

[Gormy Cuss]

6. Almost true.

Homeownership rates have increased steadily since WWII with the largest gains between 1940-1960. Since then there have been modest gains every decade except the 1980s when the rate fell slightly.

Homeownership rate at decade milestones:
Year: Rate:

2000 66.2%
1990 64.2%
1980 64.4%
1970 62.9%
1960 61.9%
1950 55.0%

1940 43.6%
1930 47.8%
1920 45.6%
1910 45.9%
1900 46.5%

(the above are U.S. Census figures.)

[ooglymoogly]

8. Of course if you took the measurements at centuries or millenia

they would be even more impressive; However here we are talking about recent and immediate history.

[Gormy Cuss]

10. The framework set by the poster was post WWII

My reply addressed the contention that homeownership rate has increased every year since then. That isn't accurate and I provided the stats at decade intervals because it shows two things. One, that the homeownership rate did decline briefly in the 1980s (directly relevant to the poster's comment) and two, that the HO rate prior to WWII declined during two other periods, most notably the Great Depression. The latter is reference for those who care about the longer context.

[ooglymoogly]

13. I guess my point is that the longer period that is measured the less,

say, Reaganomics, a disaster to the value of real estate and Bu$haloniomics, also a disaster for the value of real estate, do not matter so much; For in the long haul it is the natural course for real estate to increase in value when you have a sane president and a sane congress making prudent and common sense decisions; But that does not lessen the disasters caused by these two loonatics in the now and the immediate future.

[Gormy Cuss]

14. The analyst's quotes in the NY Times piece are sobering.

“We’re not going to see homeownership rates like that for a generation,” said Mark Zandi, the
chief economist at Moody’s Economy.com..."

I'm not familiar with Zandi's CV, but Apgar of Harvard's JCHS is one of the top experts on American housing trends:

“We’re seeing more dramatic growth in renters and a decline in the
number of owners. People are beginning to understand that homeownership can be a very
risky venture....”

Mr. Apgar said the Joint Center had predicted an increase of 1.8 million renters from 2005 to
2015, given expected population trends. Instead, they saw a surge of 1.5 million renters from
2005 to 2007 alone.... “Even though we’re only looking at a short period, these trends are pretty powerful,” Mr. Apgar said.

[haele]

11. That data up through the forties is a bit misleading.

Prior to WWII, it was not unusual to have several generations of family members living in the same house, especially in rural communities. Even as a good 2/3rds on average of households in a city rented rather than owned - the term "town house" started out as a definition of a second house for a businessman or wealthy "society" family to stay in while they were in the city; their primary residence was elsewhere - households still tended to be multi-generational and the larger households tended to have dependants, which are the primary difference between a household then and a household now.
Determining an "Owning Household" vs Renting or Paying Boarder status was a bit more tricky even in a census than it is with today's nuclear family. Did they count a household as a single owner and all their dependants, adult and minor, extended family and/or "live-in help" working solely on allowance, room and board, or the owner and his/her immediate family alone.
A five bedroom house like my great-great grandparent's Liberty, MO home in the early 1900's could easily have two or three family units, (Ma, Pa, Elder sibling and his/her spouse, Grandma&Grandpa or Auntie and Uncle)the adult pairs each having their own room, any other kids sharing a bedroom or two until it got too much and they had to build another room on.
I hate to admit it, but GG-P's also had two other dependant adults as "live-in help", basically a non-family couple with a living/census status similar to that of the extended family members in the household, who were paid for their part in the household work with furnished room and board and would either work in the store as employees or take the odd jobs outside the family for their "spending and saving" money. The story I heard from Great-grandmother in the 1980's was when they got too old to work in the 30's, they continued to live in an furnished outbuilding on the family homestead, and what little estate they had remained in the family, though they were not family members to begin with.
Situations like that were not unusual, especially with families that took in orphans from the cities and kept them as "hands" or servants for the family. After a while, those hands were close enough to be part of the family, and there would always be some reason to keep them around until they were well up into the age where they could no longer work. Of course, as most people died within 2 or 3 years of no longer being able to work, it usually wasn't that much of a burden on a household to keep those hands past their usefulness to "the family".
Personally, I'd consider that a situation like that similar to a form of voluntary servitude - they were not family members, had no inheritance to keep them there - and they could leave if they wanted to; but it would be difficult if they never made enough to actually go out and live on their own. It was better than sharecropping, but not by much.

Now, after WWII and the rise of well-paying corporate manufacturing/technology service jobs, kids left home with their own families rather than staying with Mom and Dad to help with the family business or family farm as they had generations prior. The average home-owning household of 8 - 12 members suddenly decreased to 4 - 6 members; generally a 15% - 25% drop within most households. Those household members dropped from the original households should show up in the increase of new home ownership within 4-5 years when they go went out and purchased homes of their own to raise their children, instead of staying with the grandparents. In the Post-War rise of suburbia and with the improvement of household care products, the need for dependent "hands" to hang around and do regular housework also decreased, so these smaller households didn't have the live-in servants their parents or grandparents might have had, further decreasing the household size over the years. Individual income has also risen during the Post-War years - well, at least through the 80's - and more working households had more disposable income earlier in life to be able to purchase homes during that time frame.
After 2000, I'm not so sure. Income for working families has actually dropped or stagnated for the most part, and the housing bubble was a con worked on them, so I would wait until after the "sub prime market" foreclosure trend ends before I'd consider what the actual numbers of home ownership vs. home renter-ship could be. Heck, I was a home owner during the 90's, but I'm now a home renter. And my situation is not much different than (granted, anecdotally)what is happening to a lot of people now.

2010 will be an interesting census.


Haele

[Gormy Cuss]

12. Actually, there were other factors affecting the pre-WWII rates that are important too.

I believe the census marker is based on head of household indicators, but I don't know if the census stat relies only on decennial census data. Changes in household size and type (e.g. multigenerational vs. single generation, as you noted) would affect the rate of homeownership, as would other factors like immigration status, historical barriers based on racial discrimination and urban vs. small town or rural locations.

Early in the 20th century most homeowners financed no more than 50% of the purchase because banks wouldn't lend more than that. During the 1930s the Federal Housing Administration was formed with the express purpose of increasing homeownership rates by providing affordable loans. It's the most important program in terms of boosting homeownership post WWII and is generally cited as a major reason for the boom. The immediate boom post war was fueled by the GI Bill.

[DollyM]

17. we may be going back to multi generation households . . .

We live right next door to my mother. She lives alone in this big house and pays heat and cooling,phone, cable, etc. We have a family so we skimp on heat, don't have a phone, don't have cable, (don't have jobs at present!)so we go next door and utilize my mom's heat, phone, cable, etc. If things don't improve, we may have to move in with her and rent out our house. I just never thought it would come to this. I have seen the economy bad before but we have never been in such a bad situation personally. I thought once we had our Master's degrees it would ensure we would always have good jobs. I wish I had saved the money we spent on our degrees and put it away for times like these.

[fencesitter]

5. The real meaning of the "ownership sociey".....

We got owned.

[ananda]

7. We are all considered marks by Bushinc.

And most of us are.

It's hard not to be.

We are duped by our own fantasies about America
and what we think it is when it is actually
something else entirely.

[ooglymoogly]

18. we are being led like sheep back in history to a feudalistic

era where the rich have it all and the rest have to fend for themselves on the nothing that is left.

[ooglymoogly]

9. interesting take....

and on the money I think....kr

[happygoluckytoyou]

16. BUSH..... did somebody say FAILURE

[DuaneBidoux]

19. The only way to create a real "ownership society" is to make sure people can.

This means reversing the trend where foreigners, corporations, and rich folks individually get all the fruits of the labors of the working and middle class. The fundamental problem with our economy for the last 30 years has not been lack of tech development, or lack of increases in productivity, or even purposeful malfeasance by either the wealthy or the corporation.

It has simply been that without some mechanism to make sure that regular folks get a share in their own labor it keeps flowing to the top. Eventually owning a car is a luxury, let alone buying a house.

[InkAddict]

20. How can anyone even entertain a committment to

pay on a 15 or 30 yr mortgage as jobs are being shipped off to foreign lands. And we're being unpatriotic? Combined with the high cost of fuel, which isn't exactly helping and needed to be attended to long ago with faster development of alternatives, and before the benefits of ANWAR drilling can possibly help, I fear we're looking at a generation-long depression. Semi's will be picking up the bodies in America, the elderly and the children first. * did speak the truth once, "Money trumps peace" and in *World it also trumps law and prudence.

Our apartment community was sold early this year for megabucks and the new landlord raised our rent $50. That is truly immaterial. Because we chose careers heavily based in service/computer-related technology, it's been a struggle for at least 25 years to make ends meet. Within less than a decade and because of the deregulated policies that are now in place, we'll most likely be living our last years, if we insist on being independent (LOL), in unsafe, poorly maintained and staffed institutional housing on the $40 that Medicaid stipulates. The rest will be garnished to pay for it and for the healthcare, as subsidized by you and our children, the taxpayers, and for the school loans with which we assisted our kids. A family man with a home, wife, and children was once considered a steady asset to his company, no more. The uncommitted single connected and aesthetically well-featured person is now the preference, and they seem to relish their vacuousness. Even the college degree only now keeps one on the edge of the cliff where one watches it crumbling beneath one's feet or in vast denial of the suffering all around them.

We have nothing but our memories now and what the kids say we can keep. I think they're beginning to realize how we're all going to lose our privacy and independence. This week, it seems, they're being resistant to the inevitable. I suppose my time on DU is growing short as well. I don't have baggage, I am baggage and have little control to be otherwise. I could say something "silly" here and receive all the platitudes about permanent solutions to temporary problems. Are they really that temporary when you've reached the end of your "adult" road and must now be compliant to every other. I may not even be able to vote, depending on my kids choices for me and my ability to comply, no matter what. It's that or joining the ranks of the homeless.

Sorry, it's not a good day.

[riverdeep]

21. Renting isn't actually a bad thing for some people.

I know that isn't really the point here, but the assumption is that it's always better to buy a house (or condo) rather than rent, and that's not always true. Here's an interesting post on website about finance:

In 'Rent, Grow Rich, Be Free' (another webpost), I share a personal story about when I calculated the total cost of living in our home. That day was a turning point in my financial life. We discussed our options, sold our home, downsized, rented, and invested in a well-diversified equity portfolio. A couple of years later, I officially became a millionaire. We are now financially free.

http://millionairemommynextdoor.blogspot.com/2007/10/i-get-richer-as-renter.html

She offers a calculator that tells you whether renting or buying may make more sense, but it's a guide, not a crystal ball. Also, links to other posts she and others have written on this topic are provided. It's interesting stuff. Note, she didn't become a millionaire simply by renting and investing, she also has a business, first her own, and then a small plumbing one with her husband.

Just something to consider. Renting does not automatically mean failure.