Mainlander Property Management Blog

“Since the end of World War II, the “American Dream” has been defined as owning a house. But it didn’t start out that way. When historian James Truslow Adams coined the phrase in 1931 it meant “a better, richer, and happier life for all our citizens of every rank.”

Adams wrote of the “dream” of America as an opportunity to overcome the old world’s social orders. He specifically said that it has “Always meant more than the accumulation of material goods.”

Adam’s American Dream became co-opted in the post-war years after massive federal intervention in the housing market helped turn America into a nation of homeowners. Before that, there was no stigma attached to renting; as house – whether rented or owned - was simply a place from which to pursue the dream of personal achievement.

Returning to the Way We Were

In 2009, the American Dream returned to the way it was; the way it should be.

As house prices collapsed and the so-called dream of homeownership turned into a financial and emotional nightmare for millions, people began dreaming of more sustainable and rewarding lives. They discovered that you don’t have to buy a house to achieve the American Dream.

Americans of all income levels – even the wealthy – exchanged their mortgages for rent payments, and the conveniences, amenities and flexibility of apartment living once again became chic.

A Pall on Ownership

Homeownership’s near sacred reputation has been tainted by the bursting of the housing bubble. The evidence that homeownership is a risky investment is everywhere. House prices have plummeted 30 percent since the housing market’s peak and are expected to drop another 10 percent. U.S. home-owners have lost about $5.9 trillion in value since housing market’s peak in March 2006, according to Zillow.com.

Eye-opening statistics are abundant: One in seven loans was in foreclosure by the end of September 2009, the highest on record, according to the Mortgage Bankers Association. Moody’s Economy.com expected that 2.4 million homes will have been “lost” in 2009 alone through foreclosures, short sales or deeds in lieu of foreclosure. This follows the 3.2 million households who received foreclosure notices in 2008. Some predict there will be 10 million or more foreclosures by the end of this cycle.

Nearly 11 million homeowners – one in four – are “underwater” on their mortgages, according to FirstAmerican CoreLogic, and analysts at Deutsche Bank Securities expect that number to rise to 21 million by the end of 2010. In fact, price erosion is so prevalent that 11 percent of borrowers who took out mortgages in 2009 already owe more than their house is worth, adds FirstAmerican.

Naturally, many of these disillusioned owners will think long and hard before buying another house. But there is also a psychological ripple effect to their experience. Almost everyone knows someone who lost their house or is debating walking away from an underwater mortgage; those associations will color future housing decisions for millions more. And the children of all the foreclosed owners have learned that owning a house is not a guaranteed path to wealth or happiness.

Already, the bursting of the housing bubble is reshaping our attitudes toward ownership. A 2009 survey by the National Foundation for Credit Counseling showed that almost half of all American adults no longer believe owning a house is a realistic way to build wealth. Another 42 percent no longer own a house and don’t expect to ever own one again.

Rental Resurgence

More than a housing bubble is at work here. Demographics, tightened credit markets, changing lifestyles and new environmental awareness suggest that the U.S. is on the cusp of a fundamental change in the housing market.

Our society is changing in profound ways that mean the kind of housing we want in the future is very different from the kind we’ve been building for the past 50 years. The largest generation of children in the history of the U.S. will be entering the housing market in the next few years.

By 2015, there will be 67 million people aged 20-34 – the prime years for renting, and these young renters aren’t necessarily interested in a house in the suburbs. The painful recession has also taught them that they need to be more mobile to respond to fast-shifting economic opportunities.

At the other end of the spectrum, the number of seniors who no longer want to maintain a house is beginning to skyrocket, creating new demand for rentals close to services they need.

The biggest force at work, however, is a dramatic change in what constitutes the “typical” American household. Married couples with children – the backbone of the post-war suburban explosion – now account for only one in four households; by 2020, that drops to one in five. In their place are a growing number of nontraditional households who are more likely to choose renting – single parents, couples without children and empty nesters.

The debunking of the homeownership myth is liberating Americans to challenge the conventional wisdom and instead choose the housing that best suits their lifestyle. For millions, that’s an amenity-rich apartment in a vibrant mixed-use neighborhood.

How fast are Americans becoming renters? In 2006, Harvard’s Joint Center for Housing Studies predicted an increase of 1.8 million renters by 2015. Instead, we saw a surge of 1.5 million renters from 2005 to 2007 alone. A federal housing survey reports that 2.83 million new renter households were created in the last four years, the biggest such gain in 24 years.”

Source: Metro Mulifamily Housing Association 12th Volume Apartment Report Summer 2010

By Thomas J. Sugrue and excerpted from National Multi Housing Council Annual Report