Homeownership in this country peaked at about 70% in 2005. Since that period the homeownership rate has declined to 67.4% this year and is projected to continue to drop dramatically to pre 1980 levels of about 63% by 2020.
During the late 1990's and early 2000's there was a strong push by our government to increase home owners with the view that home owners improve neighborhoods and the American quality of life. They pushed the mortgage industry to find ever more ways to make it easy to get a mortgages and buy a homes. In hind sight, we know we push too hard and were putting people into homes and mortgages they could not afford. These folks should have remained renters and
avoided all the foreclosure headaches.
This process is now unwinding and we have all seen the dramatic impact it has had on the financial and mortgage industries. But what does this all mean for you and I. It means more and more people will be renters.
The impact of going from 70% to 63% in the homeownership rate means about 23 million people will become renters versus home owners over the next decade. That is right - I said 23 million new renters.
The home building industry has already seen this trend and is shifting to building more apartments and condos versus houses. We also saw data this month that the average size of new homes is down 15% to about 2300 sq. ft. versus 2600 sq. ft.
This is very good for people catering to the rental market and has huge implications if you want to buy real estate for renters and hold for long term wealth. Landlords and property managers will be on the right side of the market for a generation or longer. This is very bullish for rental real estate once some of the current dust settles.
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