We’ve been hearing news of housings recovery for several months in a row now. That, of course, is wonderful. One thing we can’t measure quite as easily by home sales and value stats, for example, is our cultural attitudes about homeownership. What, if anything has changed as a result of the crises and is functioning below our collective radar screens?
We know there are now over 2 million more renters. And we hear younger folks – who may have watched their own parents struggle thru a housing challenge – seem to be taking more about renting that owning as a life-strategy. Housing is well along the road to recovery, but recovery to what? What is the proverbial “new normal” where housing is concerned?
Looking at historical graphs we see ownership rates and values are not yet in line with where they predictably would have been had the crises never happened and what many folks counted on when they bought into the American Dream. An airplane only a few miles off course can end up in end entirely different the further it continues. Some are estimating that the next few years will bring future appreciation on the lower (3%) range of the appreciation ranges we’ve historically seen (3 to 6%). For now perhaps the best news is distressed sales are down from 30% only a few months ago to 12% now. Without these sales dragging values down, America's home values should continue to rise in the coming months.
The long term implications of these minor differentials particularly on America's middle class – who have historically depending on home equity for 75% of their personal wealth - can be far reaching both in terms of numbers of people and years ahead of us all. Where will personal wealth accumulation for average Americans come from if not home equity? Particularly in our nation, with the lowest saving rate of all wealthy nations?
In the big picture, our “new normal” includes a new view on just about all aspects of our financial lives. In that context, sustainable homeownership still rises to the top as a cornerstone of sound financial planning, security future prosperity for Americans individually and the country as a whole.