As Home Ownership Dips, Rentals Rise

The U.S. Census Bureau has recently published reports of the steepest decline in home ownership in the last five decades. It furnishes data that there are only 65% of Americans who own homes.

According to a recent Market Intelligence report by John Burn Real Estate Consulting, this percentage does not paint an accurate picture. This is because homeowners who are late on payments by more than three months are not included in the final figure. As a result, John Burn suggests that home ownership has dipped to at least 62% in the real world.

What do these figures signify for property investors?

As home ownership is in decline, this marks good news for income property investors who rely on revenue from rent.

In previous years, home ownership for the average person was one way of building wealth. Now, a large percentage of Americans are not able to afford the associated costs of this investment, and many would fare much better with rent – at least for the short-term.

The report also speculated that most individuals are temporarily renting in order to clear up debts and save for down payments, all for an average of three years. Other market reports estimate that home ownership will begin to rise by 2013-2014.

This then begs the question: What happens when the market shifts; when individuals start buying more and renting less? What will current investors do?

Jason Hartman, having spent years through market booms and downturns, advises that you do two things now:

  1. Plan For The Future: As a property investor, it’s imperative to foresee obstacles in the future.
  2. Conduct Market Research: It’s also important to conduct in-depth market analysis.

Based on objective assumptions in the real estate marketplace, property investors have a two-three year leeway before the market turns, and citizens begin buying again.

This time frame can reel in a tidy sum of profits to invest in other types of properties besides residential homes. In addition, there will always be a market for renters, as history proves. As groups of renters move on to ownership, another cycle of renters will begin short term rentals, before jumping on to the American Dream.

In summation, there will always be a market for property investors to fill vacant properties for rent, if:

  • The investment property is in a stable location. Always choose properties in a central vicinity.
  • The property is well-maintained, and therefore provides an incentive for people to want to make a temporary home there.

These figures should motivate investors to hold onto current opportunities. With low home price and low interest rates on the rise, it’s a buyer’s market – for property investors who hold current capital. (Top image: Flickr | Sasha Y. Kimel)

The Commercial Investing Center Team