5 charts (3 of which are courtesy of Zero Hedge) go a long way towards illustrating the homeownership situation and the current buy vs. rent decision in the United States:
Since 2005, when the housing bubble began to pop, the rate of homeownership in the U.S. has been in a steady decline. On the other hand disillusioned former homeowners quickly became renters and pushed the rental vacancy rate down at a very similar rate to which homeownership fell:
Notice how the rental vacancy rate began a precipitous decline just as the 2008/2009 recession came to an end. Much of these declines in homeownership, and rental vacancies, have to do with the 2008/2009 Global Financial Crisis; damaged credit scores due to foreclosures and bankruptcies forced people out of their homes and into rentals. However, it is now seven years since the end of the financial crisis and “negative information” on people’s credit history is now beginning to roll off. Moreover, the economic recovery has seen a large decline in the unemployment rate and a steady improvement in labor conditions including average hourly earnings.
Meanwhile, what could be described as a “rental bubble” (largely due to people who could no longer own real estate being forced to rent and an entire generation who became disillusioned with homeownership following the popping of the housing bubble) appears set to come back down to earth:
After decades of steady 2%-3% increases in median rents, rent inflation has exploded in the last couple of years.
Median asking rents have risen ~50% since 2006 while median home prices still remain below 2006 levels:
While a buy vs. rent decision almost always comes down to very specific factors which are individual to the buyer/renter and the location, from a big picture perspective it looks like a major paradigm shift could be at hand. The relative value shift that has occurred during the last ten years combined with record low mortgage rates have made buying a home a compelling proposition once again.
DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher ofEnergyandGold.com. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.comfor important risk disclosures. It’s your money and your responsibility.