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February 1st, 2011

MND warns: “Watch out for rent inflation!”



For RentYesterday the U.S. Census Bureau released their fourth quarter report on homeownership and vacancy rates. Taking a quick look at the data, it’s apparent that homeownership rates have fallen while rental opportunities are picking up.

Here’s a brief synopsis of the release from Mortgage News Daily (emphasis added):

The homeownership rate fell to 66.5% in the fourth quarter of 2010. This is a 10 year low. In a reallocation of sorts, the rental vacancy rate declined as housing consumers are choosing to rent instead of own. This is rising for one of two reason, the pool of qualified borrowers has shrunk considerably as lending standards have tightend…or people are choosing to wait it out a bit longer to see if home prices to indeed double dip. This makes sense as excess inventories are seen hampering the home price recovery process, especially in the hardest hit regions. The homeowner vacancy rate, which measures the number of unoccupied homes on the market (available for sale) was basically unchanged at 2.7% in Q4 2010. This likely reflects a reduction in home evictions thanks to the foreclosure moratoriums that were enacted as a result of the robosigning scandal. However we could also look at the number of homes being held of the market as another gauge of shadow inventory. That metric has risen from 6.77 million in Q4 2009 to 7.23 million in Q4 2010.

Rental units are clearly in demand. Watch out for rent inflation!

Click here to read the Census Bureau’s full report.

With all the emphasis U.S. lawmakers have placed on the ideals of homeownership over the years and with more Americans renting, I wonder, “Should the government do more to encourage renting?”

One of HSH.com’s contributing writers, Steve Bergsman, author of “After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade,” believes the answer is “no.”

The mess that we are in today is not because we didn’t do enough to encourage renting. Instead, through government and banking programs, we changed the psychology of homeownership from basic shelter considerations to making it the prime investment vehicle for most American families.

A toxic mix of low mortgage rates, government instigation, brake-free banking, a compliant Wall Street, and corporate and personal greed created a crucible where the single-family home became the symbol of every American’s best chance to get rich. Sure, you could win more with a lottery pick, but buying a home offered better odds and you could live in your investment. What could be better?

The best policy going forward is to de-emphasize the home as an investment vehicle, other than something with an appreciation that is long-term at best.

“With the foreclosure crisis, we realized that we went too far in one direction, home ownership,” says Maureen Friar, president and CEO of the National Housing Conference/Center for Housing Policy in Washington, D.C. “Everyone got on the bandwagon. People became homeowners without the necessary financial wherewithal.”

Click here to continue reading Steve’s article “Should the government do more to encourage renting?”

READERS: What do you think, should Washington do more to encourage Americans to be renters as opposed to owners?

One Response to “MND warns: “Watch out for rent inflation!””

  1. Tweets that mention MND warns: “Watch out for rent inflation!” | HSH Financial News Blog -- Topsy.com Says: February 1st, 2011 at 8:26 pm

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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