Homeownership Rate Drops: 23 Million New Renters Arrive – Are You Ready?

A recent USA Today headline reads: “Home Ownership Rate Is Plunging: Analysts Forecast Drops to 1985 Levels.” Homeownership in this country peaked at around 70% in 2005. Since that period, the homeownership rate has dropped to 67.4% this year and is projected to continue to fall sharply to pre-1980 levels of about 63% by 2020.

In the late 1990s and early 2000s, there was a strong push by our government to increase the number of homeowners with the prospect of homeownership improving neighborhoods and the American quality of life. They pushed the mortgage industry to find more and more ways to make it easier to get mortgages and buy homes. Looking back, we know we pushed too hard and were putting people into houses and mortgages they couldn’t afford. These people should have stayed renters and avoided all the headaches of foreclosure.

This process is now unfolding and we have all seen the dramatic impact it has had on the finance and mortgage industries. But what does all this mean for you and me? It means that more and more people will be renters.

The impact of going from 70% to 63% in the homeownership rate means that about 23 million people will become renters versus homeowners over the next decade. That’s right, I said 23 million new tenants.

The home building industry has already seen this trend and is shifting to building more apartments and condos instead of houses. We also saw data this month that the average size of new homes dropped 15% to about 2,300 square feet. foot against 2600 m2 foot

This is great for people catering to the rental market and has huge implications if you want to buy real estate for renters and maintain long-term wealth. Property owners and managers will be on the right side of the market for a generation or more. This is very bullish for rental real estate once some of the current dust settles.