Like fashion, real estate goes in and out of vogue. What was all the rage in one decade can be out the next. Well, now the real estate reset is homeownership.
My parents grew up in a big city that, not unlike other big cities, had more renters than owners. The suburbs didn’t exist and most people either lived in the “city” or the country. As we all know, after World War II, homes were built creating suburbs adjacent to big cities and for the first time, middle-class people could buy a home near where they worked.
We’re seeing the beginning of a new trend and Americans who would traditionally be homeowners have become long-term renters, many of whom have made this choice as a lifestyle change.
For decades renting was only a steppingstone for the upper and middle class before it was time to buy. Owning a home was always considered by most families their major asset and they depended on building equity in that home. But what we’re starting to see now are high-income families and seniors who aren’t ready for retirement communities but don’t want the responsibility of home ownership opting for renting.
These new American renters are looking for luxury and services including concierge services and amenities. They’re choosing to invest their money or spend it on vacations and their children’s education. Benefiting from tax breaks and capital gains exclusions no longer holds the same appeal. Investment portfolios are being reworked to invest in tax-free products and municipal bonds without a thought of building equity in homes.
About 64% of people in the U.S are homeowners compared with about 89% of people in China and 87% in India. These numbers set me on my heels. Didn’t we invent middle-class home ownership and the American dream?
Like so many other changes in our lives, COVID-19 is the pandemic that keeps on giving. The effect on the real estate market is significant. Interest rates went up, making mortgages unappealing to buyers even if they could afford the higher rates. The lack of inventory discouraged them even more and the mobility of work and living arrangements played into the new world order we’re starting to see. Of course, the big losers here are the lower-income renters who are being hit with increases in rental fees and a lack of available properties to rent.
Entire single-family home rental subdivisions, build-to-rent, are being constructed, marketing to high-earning families and seniors. This is no longer a transition for people, it is a lifestyle choice and likely permanent. In the state of Florida, I found build-to-rent projects in both Charlotte and Lee counties, Jacksonville and Port St. Lucie. In 2022, 14,500 of these communities were constructed around the country. One report said there are now 44,700 under construction and another report by an online firm Yardi says that number is 84,459. Either way, we are seeing a significant trend.
None of this will be affecting Anna Maria Island, which always moves to its own drummer. However, the trend in lifestyle with fewer homeowners and more renters could change how home investors on the Island view their investments. You never know what will change the real estate market. Who could have predicted what has happened in the last three to four years?
I hate to sound like a senior citizen, which I am, who is stuck in a time capsule, but with Americans becoming more and more self-centered, the appeal of community and homeownership is being threatened. Wouldn’t Mom and Dad be shocked?
