While we hear much about the size of the just-started-to-retire 77.2 million Baby Boomers (1946-1964), the generation beyond mine (I’m an X-er, but barely, born in 1966) is bigger. The Gen Y cohort (b. 1977-1996) is 84 million strong. Behind that, the Millennials, are 48 million+ in number. (All data from U.S. Census Bureau).
While 69% (and dropping) of the US population are homeowners, and 85% of those over 65 own homes, listen to this: ONLY 49% of those ages 25-34 own homes. They are renters.
Eventually, do you think those kids are going to become homeowners? As much as is said about the value of renting — and to be sure, it makes great sense in many many cases — it would be a scary thing if my 75 year old father was still managing a $2000/month rental payment rather than sitting in his free and clear home. At some point the mortgage gets paid off; the rental payment never goes away. I think homeownership makes sense for a huge variety of reasons, even if the house is never worth a penny more than what you pay for it. But for now, the Y’s and Millennials are renters and will be for quite a while.
Which begs a question in this web 2.0 world — who is providing a Zillow-like experience to all of these renters? Craigslist, sure…our property managers use this constantly. But what a terrible user experience…hard to find, hard to sort, you have to re-post regularly to keep up exposure, limited pictures, no mapping. Sure it’s free…but I’d happily PAY as a rental property owner to have a service that actually maps, shows pictures, and be easily reactivated when vacant. I’ll bet tenants would pay to use it. Rent.com is another provider of rental listings, but they mainly service the large, corporately owned apartment complexes.
Where is the national database of rental listings, providing a great consumer experience for both landlord and prospective tenant?
Thanks for the great info. I hope you’ll follow this with some more great content.
Comment by Psychic Advice — July 12, 2008 @ 11:13 pm
I’m 31, married with kids, and my family rents from you, RPA. We’ve been renting the same house for over five years, and the monthly rent is barely 10% of our net income.
It’s reasonable to ask why we would have decided to start renting when we moved here five years ago, and why we would continue to rent now. The answer is simple – the Seattle housing market, particularly in the attractive areas, has been and continues to be overpriced by a large enough margin that I have purposefully chosen to keep renting, both for personal and civic reasons.
I’m a firm believer in the stabilizing influence of home ownership on a macro scale. After living in Europe for a while, I saw what types of societies emerge when home ownership is a luxury available only to the well-heeled. And I’m not oblivious to the tax incentives for owning, or the long term macro CAGR of median single family home valuations. And I’ve watched several of my friends flip homes in Seattle for 10% and 20% net gains after only two years, which has led me to question more than once whether my decision to abstain from the market has been sound.
But when Bear Stearns collapsed, Fannie and Freddie Mac hit the skids, national median home sales prices and volumes dropped (or plummeted, depending on the region and locale), my local ‘flipping’ friends began to have ‘liquidity issues’, I felt strongly vindicated. Too many people have had a real estate optimism bias for far too long, and this has created a number of systemic issues. In Seattle in particular too many people have forgotten basic economic principles – the marginal unit can either set the price higher or lower, and it is in fact possible for home prices to drop. Optimism bias has led many to note the immediate increase in the value of their home when their neighbor’s home has sold for an appreciated sum, but to discount the data when a comparable home sells for less.
When the local market and the national macro market return (or near a return) to the sustainable long term median single family home price CAGR of inflation + 2%-4%, I’ll be ready to buy. Or if my family’s income rises to the point where we can afford a suitable home with payments that consume less than 25% of our net income.
j
Comment by jjw — August 10, 2008 @ 4:06 pm
JJW, thanks for this thoughtful comment. Your note was stuck in my filter for some reason which is why the posting was delayed.
I think you make great points for your particular situation, and it sounds like given the stability of the rental you’re in with us, it continues to work out well for you. I especially concur with the “real estate optimism bias.” I was getting plenty sick of it as well, as I’ve been around long enough to have seen declines and plateaus in the past 20 years. Sellers telling me “it must be worth more now than when you did your CMA six months ago, right?” is a troubling thing, and turns out to have been a bit of a harbinger for this current market.
Would you feel differently about your renting if you had been forced to move once or twice over these past five years due to a landlord needing to sell, or move back into their home?
Comment by seattlebroker — August 18, 2008 @ 12:50 pm