Rethinking Home Ownership is the New Normal
The economy has people all across America rethinking much of what passed as common opinion just a few years ago:
- A home is the best investment you can make
- Being a manager in a stable financial institution means a secure career
- College is worth the tuition investment
- Working hard and playing by the rules pays off
These ideas seem almost laughable now. After what the U.S. economy's been through, you'd be hard-pressed to find anyone who'd agree.
For income property investors, the writing has been on the wall for some time. Landlords know that investing wisely, not taking on a lot of debt and being in control of your own financial future is a better way to go.
And that thinking is becoming more popular. Owning a home is not the path to financial freedom it was thought to be. And renting is in.
Economic advisors and pundits agree that “people shouldn’t look at a home as a way to make money because it won’t.” That quote is from Dean Baker, co-director of the Center for Economic and Policy research. He estimates it will take 20 years for Americans to gain back $6 trillion losses in housing wealth.
The generations that came before saw buying a house as a way to have stability—not as a way to get rich quickly. Housing values rose slowly and steadily over longer periods of time. Experts maintain that prices will again rise—but not like they did from the late 1970s to the late 1990s. “The experience … was an aberration,” says Barry Ritholtz, of Fusion IQ, an equity research firm.
The new reality is that home values can go down. People can become trapped in a house they cannot sell. And the rate of homeownership is declining. That means renting will be on the increase for some time to come.
And that’s good news for the landlords who’ve been thoughtfully investing in rental housing all these years!