Mortgage collapse spurs renter growth

A collapsed mortgage industry and high unemployment has shifted the national population from one of homeowners to one that’s increasingly made up of renters.

The proportion of U.S. households that own homes is at its lowest point since 1998. When the housing bubble burst four years ago, 31.6 percent of households were renters. Now, it’s at 33.6 percent and rising, according to census data analyzed by Harvard’s Joint Center for Housing Studies and The Associated Press.

Nationally, nearly 38 million households are renters and that number appears that it will continue to rise.

One of the issues making it harder for renters is the tighter lending requirements.  You still have to be approved for credit.  Also, the requirements for larger down payment make it hard for first time buyers who traditionally don’t have a lot of money saved. Add in the job instability and many renters are just scared to obligate themselves to owning a home.

Especially among younger Americans, owning seems more risky.

There’s been this idea for years, a part of the American dream, that owning a home improves and strengthens communities. But what we’ve learned over the past few years is that many people simply are not ready to own a home.  They lack either the financial resources or understanding of the commitment.

From the 1940s until 2007, homes appreciated an average of nearly 5 percent a year, adjusted for inflation. In the past four years, the median price of a single-family home dropped 37 percent, by $57,500, to its lowest point since 2002.

Home ownership does bestow financial advantages. Each loan payment builds equity. Loan interest and property taxes provide tax deductions. And in normal housing markets, home values rise over time. But for now, renting is more attractive.

“It’s becoming so difficult for most Americans to afford a home, with larger down payments and tighter credit, that it is creating a renter’s nation,” said Robert Shiller, a Yale economist and co-creator of the Case-Shiller home price index. “The home is no longer an investment – it’s a burden.”