Home Ownership At Decades Low

Yesterday I touched a bit on how I think the housing market is going to be ravaged by student debt and other debts in general across the country. If you look at home ownership from the 1950s until now, you can see that we are at about the rates of the 1960s which is significantly smaller than the rate we have been in the last 5 or so decades. At the same time you can see rents are growing at a pace faster than income, so what is going on?

In simple terms, the housing market has been and continues to get consolidated by large corporations. In 2008 there was no sector hit harder than real estate, with mortgage lending grinding to almost a complete stop. Those who had physical cash or money during that time were able to basically get the deal of a lifetime. Giant developers and real estate companies that werent completely leveraged were able to buy up large chunks of property in various cities. New York, Boston, and LA all saw the consolidation of properties from many owners, to much fewer.

The reason consolidation is bad is primarily because it lowers the amount of competition for owners of properties and the prices of what you actually get are so ridiculous that the real estate companies are the only ones who can afford to buy them. They are willing to take a much longer return on investment if it means removing competitors. Rent is essentially being set at whatever people are willing to pay, which is a ton in places like Manhattan. This has pushed people into places like Harlem and Brooklyn, but now even those places are being actively purchased and developed.

Things are only going to get worse in my opinion, mostly because even at the ridiculously small interest rates we have now, people arent buying homes. What happens when interest rates go back up and there arent 4% mortgages available? People plain and simple arent going to be buying houses. The rent trap will continue and these mega real estate companies will just continuously consolidate. 2008 shook up a lot of markets but I believe these are the long term ripple effects happening before us.

The Federal Reserve keeps promising they will raise rates this year, but I doubt they can do it by much. There is a good chance the endless stream of cheap money is going to continue to flow into the economy because turning it off could be very dangerous. If you have the money and have been thinking about purchasing a home, it might be the time to do it, especially if you have a ton of job security. Mortgages are so low it also might just be a decent investment if you or a relative buy something to rent out. I tend to invest in REITs (Real Estate Investment Trusts) but if I had a more secure line of income I would probably buy something up.

-Calaber24p