Home Ownership Has Shifted from ATM to Boat Anchor

As the saying goes; "The only thing constant is change." Home ownership has often been viewed as a cornerstone of the American dream. Today it is being scrutinized from a different lens. More and more people are consciously choosing to rent rather than own.

Conventional thought was to own an appreciating asset and leverage the interest paid on the mortgage to further reduce your tax obligation to Uncle Sam. Neither ownership nor tax deductions are available to renters. Why then are so many people avoiding such an enviable perk? There are two fundamental reasons; mobility and poor investment return.

Companies are no longer eager to offer lucrative relocation packages to move talent from one territory or office to another. Sure there are exceptions; however, the vast majority of companies have drastically reduced relocation incentives. Howe ownership has been moved from the tangible asset category to the intangible liability category for those fast movers that look to quickly ascend the corporate ladder. The conventional thought today is that saying yes to a $20,000 promotion is easier than turning a $20,000 profit in home equity.

Additionally, it does not make as much sense financially to tie up a monthly stipend on an asset that has an uncertain 5 year return. The housing market is at a standstill with continued price compression mired with toxic assets that are slow to move. Supply is significantly outpacing demand with no relief in sight. There have been two volleys of foreclosure that have driven inventory levels to all time highs despite historically low interest rates.

Of those that would like to be home owners, many have blemished credit and are forced to rent. Those with great credit and aspirations of upgrading their home are faced with an upside down investment. They simply owe more than the market will bring. It is a stalemate.

The era of flipping homes and riding the wave of appreciated home values has come to a screeching halt. There is no doubt it is a buyers market. The problem is that there are too few buyers. As one would expect, the increased demand in rent has driven prices up as occupancy rates increase which may ultimately begin to attract home buyers once again.

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