When you think of the American dream, what do you think of? If you're like most people, it's owning your home with a white picket fence. Okay, maybe not the white picket fence anymore.
Bloomberg published an article recently by Karl Smith that our Nation's becoming a ‘Nation of Renters’, which unfortunately I believe is the case. The article said, “America actually should become a nation of renters”; which I think is absolutely preposterous. Let's take a look at some of those arguments and why it is so ridiculous:
#1 - Lack of Liquidity
They pointed to the lack of liquidity in the housing market which sometimes makes it challenging to migrate to new areas. While this is true in some respects, in that it can slow down a move to being contingent on the sale of a new home, I actually think it's the opposite.
When you own a home, you build equity that gives you the very ability to have mobility in the first place to make a move. And one of the reasons for that is the average net worth of a renter is only $6,300. You can't move a family of four across the country for $6,300. If you compare that with the average net worth of a homeowner, which is over 40x that at $255,000; it gives you the ability to have the mobility.
#2 - Testing New Neighborhoods
The article also argues that with the more rental opportunities you have, you have a better chance to test out a new neighborhood without that financial commitment.Now this is true in theory, but for most people they're not going to have the funds to kind of “move up” and try new things. This is because rent continues to go up with inflation versus having that fixed rate mortgage that is helping you to build that equity.
#3 - Dignity & Pride
Karl also left out the details of basic human psychology that comes behind dignity and pride of home ownership. We already talked about the Wealth Generation piece which builds family legacy. Basic human dignity comes through ownership. We're not a socialistic society, we're a capitalistic society. This is where socialism fails, when they take away ownership from the population.
Homeownership is important to both individuals and communities. That's why it's so dangerous that 1 out of 4 homes right now and in some areas actually as high as 1 out of 3 homes are being purchased by out-of-town investors and hedge funds.
It's predicted that millions of people will become lifelong renters over the next few years. Don't be a statistic and don't let your friends and family become a statistic. What do you think? Comment below if America should become a 'Nation of Renters. If you're concerned about becoming a lifelong renter, contact us.