Once the star of the American Dream, homeownership has fallen on hard times, a victim of the financial crisis and wary homeowners. With home sales at record lows despite rock-bottom mortgage rates and home prices, some say a country once beholden to the mortgage note is now a nation at the behest of landlords. The story sets up a classic whodunit, begging the question: Who set up homeownership to take the fall?[IMAGE]
By all accounts, answering the question about who benefits is obvious. Renters continue to see favorable rates, with second-quarter apartment vacancies plummeting to 5.9 percent, a low unseen since 2006, a ""_Reuters_"":http://www.reuters.com/article/2011/08/16/us-usa-housing-idUSTRE77943O20110816 story reported real estate firm ""Reis Inc."":http://www.reis.com/index.cfm as saying. Add to this a ""Census Bureau"":http://www.census.gov/ report that found housing starts receding by a seasonally adjusted 1.5-percent annual rate over July, alongside a 7.8-percent rise in multifamily housing ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô a reflection in rentals ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô and the death of homeownership in America inches away from simple conjecture.
_Reuters_ quoted a ""Morgan Stanley"":http://www.morganstanley.com/ report as concluding that the ""combination of falling home prices, limited mortgage credit, continued liquidations and better rental options is fundamentally changing the way Americans live,"" with the country on the road to ""becoming a rentership society.""
Tellingly, existing-home sales remain unseasonably pale, with a July index released by the ""National Association of Realtors"":http://www.realtor.org/ (NAR) revealing a shellacking in single-family home sales, which dropped 0.8 percent in June and lowered home units to 4.77 million at a seasonally adjusted annual rate. ""Fannie Mae"":http://www.fanniemae.com/newsreleases/2011/5469.jhtml?p=Media&s=News+Releases further muddied the whodunit by releasing a study this month that found 53 percent of single-family renters in favor of rentals.
Not that Americans overwhelmingly prefer signing apartment leases to mortgage notes. To the contrary: a ""_New York Times_/CBS poll"":http://www.nytimes.com/2011/06/30/business/30poll.html from June unearthed the known fact that Americans still behold homeownership as a central tenet of the American Dream, with about nine in 10 survey respondents affirming the national pastime despite economic angst.[COLUMN_BREAK]
So where are home purchases?
Speaking to _MReport_ for a past story, Maureen Maitland, ""Standard & Poor's"":http://www.standardandpoors.com/home/en/us VP of indices, named names by highlighting the impact from high unemployment, low job creation, and an oversupply of vacant and foreclosed properties.
""People will go out to dinner but they're not about to make a 30-year commitment,"" her colleague, David Blitzer, managing director and chairman of S&P's index committee, tells _MReport_.
Walter Molony, a spokesperson for NAR, fingers tight underwriting practices as another suspect culpable for the upswing in rentals.
""The big monkey wrench is tight credit,"" he says, citing the above NAR index, which found 16 percent of all contracts falling apart during the underwriting and appraisal processes. ""Lenders have only been willing to lend to creditworthy buyers."" He says that unsure lenders prevent the rise of a ""stronger housing market.""
He answers the whodunit with a surprise answer about homeownership over the long haul: ""The rent-versus-buy equation is tilting toward buyers.""
Sounding the same refrain, a study by real estate Web site ""Trulia"":http://info.trulia.com/index.php?s=43&item=129 portrayed home prices as definitively lower than rental costs in 50 of the nation's largest cities. Median price listings fell below average renting costs in 74 percent of the cities, with Las Vegas and Detroit taking top spots for record home affordability numbers.
So if ""housing seems affordable, why aren't people buying?"" Maitland asked, reiterating the question at the heart of a homeownership yarn. She described ""this group of people that have income, want to buy a house, can afford to buy a house, but credit is so tight that they are no longer able to get what they would like to get.""
Daisy Kong, a spokesperson for Trulia, answers by shining a light on unemployment and foreclosures ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the usual suspects ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô saying these issues keep people away from home purchases even in markets where properties are more affordable than apartments. ""Until there is stabilization in the home market, I don't think we're going to see a huge influx of people wanting to buy homes,"" she says.
Reaching the same conclusion, Molony explains that ""it's been confidence issues holding people back. You have a lot of renters who have been on the sidelines waiting to see prices drop or to feel confident in their own jobs.""
So will more Americans rent or run back to homes once the economic malaise lifts?
""This is not something that can be fixed in a month or two,"" Maitland said. ""Unfortunately, the housing market is still very weak. It's going to take awhile"" for homeownership to recover.