13/07/2024

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Is Home Ownership Or Home Rental The American Dream Today?

Is Home Ownership Or Home Rental The American Dream Today?

There was a time when home ownership was the embodiment of the American dream: a family, a dog, and a white picket fence were a symbol of success.

Homeownership represents a chance to put down roots, build equity, and ensure a stable future — or at least it used to. The American Dream isn’t quite what it used to be, and home ownership is not nearly the dominating cultural force it once was.

So what caused this shift in the American psyche, and what are the ramifications?

The Real Numbers on Home Ownership

To start unraveling the reasons why American attitudes toward homeownership have changed, we can first look at some 2017 data from the Pew Research Center. This data shows that for the first time since 1965, more people are renting houses rather than owning them.

Between 2006 and 2016, the data shows that the number of homeowners remained relatively flat, while households renting their homes increased from 31.2 percent to 36.6 percent. Home rentals have risen particularly high among young adults, non-whites, and the less educated.

The Real Numbers on Home Ownership

What is Causing This Trend of Home Rental?

One of the major driving forces behind this trend is the ongoing housing crisis. Property prices and mortgages have been on a steep climb for years, making home ownership an impossible dream for many Americans.

First-time buyers are having a difficult time saving up for a home, and even current homeowners sometimes struggle to make ends meet, especially with inflation creating problems for the economy. According to the National Association of Realtors, the median home price in 2021 hit the highest point in over a decade at $329,000.

Mortgage rates have also risen, making financing a home even more challenging. Homeowners insurance has also seen a massive increase over the past few years, further fueling the move toward renting.

The main reasons for this increase? Climate change is among the front-runners.

A massive upsurge in extreme weather events like hurricanes, wildfires, and flooding has resulted in massive payouts for insurance companies, who have had to raise prices to compensate (or just pull up stakes altogether).

In fact, depending on where you choose to live, renting a home can be a more cost-effective option than home ownership. Real estate prices, property taxes, homeowners insurance, and other factors can make renting a smarter financial choice, even in the long term.

Per data from Realtor.com, it is far cheaper to rent a two-bedroom apartment in New York or Los Angeles than to make a mortgage payment on a similar property.

The Younger Generation

The Younger Generation

Another reason for the changing trend in home ownership has to do with the younger generation. Millennials and Gen Z work harder and have less disposable income than previous generations, and home ownership is simply out of reach for many of them.

Not only that, but many younger people don’t particularly feel like settling down permanently because of the responsibilities of home ownership, maintenance, property taxes, or HOA fees.

This attitude goes hand-in-hand with the rise of the “digital nomad” lifestyle. With remote work far more widespread than ever before and the Internet making it possible to work from nearly anywhere, an increasing number of people are choosing to go without home ownership, instead choosing to rent.

Renting provides more mobility and convenience, allowing them to change jobs or locales with far less fuss than a homeowner would.

However, not everyone is forgoing home ownership due to monetary concerns. An increasing number of high-income earners are choosing to rent instead of buy, even when buying is well within their reach.

Renting doesn’t have to mean a small, cramped apartment: it can include luxurious condos and large apartments with numerous amenities such as gyms, rooftop terraces, and other features.

Tenants can even take out renters insurance to protect their belongings in the same way homeowners can — without having to worry about many of the negative aspects of home ownership.

Pros and Cons of Homeownership

Pros and Cons of Homeownership

Of course, that’s not to say there aren’t some significant advantages to homeownership. One of the most commonly cited advantages of home ownership is equity.

Real estate tends to appreciate in value, and a house can be a great investment should the homeowners ever decide to sell. Renting an apartment or condominium offers no such advantage; the money spent on rent will never pay dividends.

Owning a home can also give a sense of permanence and stability that a rental unit simply can’t. Even if you are a great tenant who pays their bills on time, it is possible you could get priced out of your apartment or otherwise ejected. After all, the landlords own that property, not you.

Ultimately, there’s no “right,” one-size-fits-all answer to the question of housing; financial realities, personal preferences, and the vagaries of the market can all make a big difference whether or not a family or individual chooses to rent or buy.

But, for the moment at least, the future seems to be leaning toward renting for more and more people.