Renting is becoming the new reality
Want to be footloose and fancy free? No lawn to mow, no weeds to pull, no trim to paint , no air conditioning to replace and no mortgage to pay. There is a way – become a renter. In our here today, gone tomorrow world practically anything can be rented from clothes to cars without any stigma attached.
The American dream of owning your own home has tarnished a little in the wake of the financial meltdown and housing bubble resulting in a new reality termed "rentership society." For a lot of homeowners who found themselves essentially paying rent on their underwater homes, there isn’t much difference between paying rent to the bank or to your landlord.
The nation’s homeownership rate hit an all time high of 69 percent in 2006 and has since fallen to 65.4 percent, primarily due to the great recession, which resulted in loss of jobs and homes. This has produced a large segment of the population that would normally own homes opting to pay rent while keeping job opportunities flexible.
According to Moody’s, by late 2011 it was less expensive to rent than to own in 72 percent of American metropolitan areas. This staggering number was up from 54 percent a decade ago. These numbers support the fact that renting is no longer seen as a sign of failure, rather just a a new reality.
With demand, however, comes shortages, and renters are facing a tight rental market in almost all parts of the country as vacancy rates continue to fall, hitting their lowest point in more than a decade. Consequently, rental costs are going up, despite the sluggish economy, with rental rates increasing in most rental markets.
The obvious flip side of people renting rather than buying is that someone still has to own the property that is being rented. This has left the building industry shifting gears to fill the country’s rental needs. Housing starts for multifamily units have risen sharply since 2009, and some builders are switching their planned condominium units to rental apartments.
It’s also a great opportunity for cash rich investors to buy distressed single family homes and condominiums to turn into rental properties. Fannie Mae and Freddie Mac are owners of more than 200,000 properties, thanks to the foreclosure crisis. Rather than try and sell these properties individually, they are packaging them with the hope of marketing the package to private equity investors and real estate companies to turn into rentals.
It wasn’t that many years ago that renting was the norm for most of the population. Not until after World War II was homeownership even achievable for the average family. Therefore, what we’re experiencing now is not that far removed from our parent’s generation.
Besides, renting does have its advantages and a lot of very practical applications. Zipcar has filled a gap for big city residents by renting cars by the hour. You can rent formal evening wear, wedding dresses, pets, beds, dishes you name it.
A friend of mine from Great Britain found herself in the position of needing one of those iconic British hats for a once in a lifetime Buckingham Palace garden party. After contacting Felicity Hat Hire, her outfit was complete, and she was right in step with our emerging rentership society.