It's not about income - home ownership rates are still down everywhere & that's a mistake
Bottom Line: For the first couple of years of the real-estate recovery it was understandable to see low home ownership rates. By January of 2012, when the real-estate recovery began - these were all legitimate reasons for low home ownership rates including:
- The job market was extremely sluggish
- Distressed property sales were still extremely high
- Mortgage terms were more restrictive
- Credit scores were still impaired
By now all of those have improved significantly. What hasn't is the home ownership rate. In previous reporting the best excuse I saw for low home ownership rates was the income argument. After years of low income growth, and rising fixed expenses like healthcare costs, it seemed plausible that home ownership rates might still be a bit low (despite the average home being cheaper to buy than to rent). But the latest from Gallup shows that's not actually the case. Regardless of one's income or geography - home ownership rates are still much lower than prior to the recession.
Here are the highlights:
- Overall home ownership rate: -8% from 2008
By Income:
- $30,000 or less: -12%
- $30k - $75k: -10%
- $75k - $100k: -10%
- $100k - $150k: - 5%
- $150k+: -7%
So that's not it either. Add in that we're also seeing record low migration (adults are far less likely to move today as compared to anytime previous) and even the flexibility consideration doesn't make sense. Real-estate is the 2nd best performing investment class historically and it's cheaper to buy than rent like properties. For those reasons it makes sense for just about anyone who's able and plans to remain in place for a minimum of three years to be buying rather than renting.