As a baby boomer I grew up with certain expectations and accepted truisms. One of them was: Renting a home is as foolish as throwing money down the drain. Perhaps borne out of the Great Depression when so many became homeless, home ownership became a measure of success for my parents’ generation and the cornerstone of the American dream for mine. To wit, in the first 17 years of our marriage, my husband and I moved seven times. Yet only twice did we rent instead of purchase. Thankfully we have settled down and now have our eyes on a mortgage burning party…coming soon.
The current recession along with the social pressures of the green movement may very well redefine the American dream as it pertains to home ownership. The Future of Home Ownership Implications for the Wood Products Industry, released by APA – The Engineered Wood Assn. in February, suggests that future trends may lean toward fewer and smaller single-family homes with multi-family units sharing a larger portion of the pie and, thusly, consuming a smaller volume of wood products. U.S. home ownership rates have declined from a peak of 69.2% in 2004 to the current 66.9% in second quarter 2010. Single-family dwellings (including mobile homes) peaked at 84% of that ownership in 2005 and declined to 71% in 2008.
According to the Center for Economic Policy and Research, the collapse of the housing bubble has destroyed $6 trillion in housing wealth so far. Hardest hit are the 75 million baby boomers who saw their home as a safe investment and their primary wealth building tool. Many have seen their wealth cut in half and have little, if any, time left to recoup those losses before retirement. Will these boomers cash in their largest, now undervalued asset in favor of a smaller condo or rental property?
Young adult children of Boomers, numbering 85 million, typically prefer urban living and more than half are renters. Seeing the plight of their parents, will they still see home ownership as part of the American dream? And given that many career consultants claim today’s worker can expect to change careers as many as five times in their lifetime, the mobility of renting may become more attractive to career builders.
Tighter credit markets have also upped the ante to qualify for home loans and require larger down payments than in recent history, so many would-be homeowners may find it difficult to get into an affordable mortgage. Immigration also plays a key role in future housing demand as most are initially renters, but typically become homeowners a few years after arrival. In addition, the estimated 12 million immigrants who are here illegally tend to be renters.
There is also a push toward multi-family housing from the “smart growth” crowd, who favor high density housing to preserve open spaces and reduce the need for ever expanding public infrastructure requirements to supply sprawling suburbans. Green building standards are taking root, too, pushing for smaller, more energy efficient housing. Though wood products are easily the most environmentally beneficial building material, industry is still having a difficult time getting fair treatment in the LEED standard. From where I stand, it looks like it is going to be a long slow climb back to “normal.”