What The Credit Crunch Means For Renters
The credit crunch has been in place since 2008 and still is far from over. When you combine that economic reality with a look at the current unemployment rate of 6.2 percent, what the credit crunch means for renters becomes crystal clear: rentals will continue to be robust for a number of reasons.
Millennials turning their backs on homeownership
The Millennial generation, especially people in their 20s, are experiencing a high rate of both unemployment and underemployment. Lacking stable careers and strong credit histories, they are deferring marriage, families, and homeownership.
But there is more to this story. According to research done by NPR, Millennials are ready to spurn homeownership more permanently.
Between not knowing where their careers (once they establish them) will take them and watching what has happened to homeowners whose property is under water or foreclosed, many Millennials are reframing the idea of renting as freedom to follow their dream jobs and freedom from the onus of mortgage loans.
For many Millennials, the credit crunch means that they may never get to where homeownership is a real choice. Here’s what the experts told NPR:
“Even with big drops in housing prices and interest rates, getting a mortgage has become a lot harder since the heady days of “no income, no assets” loans that fueled the housing boom of the early 2000s. Most lenders now require a rock-steady source of income and a substantial down payment before they will even look at potential borrowers. And many millennials won’t be able to reach that steep threshold.”
Homes no longer investments of choice
For those of any age seeking housing, it once was the case that homes were seen as a rock stable investment for an uncertain future—an investment that could be liquidated easily if necessary.
Now, as U.S. News & World Report suggests, that uncertain future includes home prices—shifting would-be homeowners to consider renting as the more practical option.
Financial advisors are cautioning would-be homeowners to scrutinize all the costs associated with homeownership, which further shifts the decision point towards renting.
The length of time that the credit crunch and concomitant high unemployment rate have been in place seems to have had another impact on the question of long-term renting: redefining long-term renting as financial success, a definition once reserved for solely for homeowners. That is a sea change.
The Washington Post reports on a MacArthur Foundation study titled, How Housing Matters: The Housing Crisis Continues to Loom Large in the Experiences and Attitudes of the American Public.
Essentially the report reflects the public sentiment that homes may no longer be a path to grow wealth; therefore, “renters could be just as financially successful as homeowners at achieving the American dream.”
If you are considering whether to strengthen your rental property portfolio, RM Properties, property management experts in Washington, D.C. and Maryland, stand ready to assist you with more information about investing in rental properties. Please contact us to learn more.