This morning LinkedIn’s feed contained a lot of commentary in regards to the above linked article by the Daily Herald. Many comments referenced anecdotal observations from local markets rather than seeing the article’s main point that large institutional investors are looking at national trends. We, the independent real estate professionals working at Windermere franchises, are pretty lucky that our corporate leadership provides an on-staff economist to help us understand how national trends interact with our local market. Matthew Gardner, the Windermere staff economist, just visited the Rogue valley and his analyses help me comprehend the impact of trends like the one mentioned in the Daily Herald article.
For lay people, the questions we often answer in a typical Buyer or Seller interview, are focused on the local market, not on national trends. But, the national trends do effect what happens locally albeit in a much smaller way than in more populated markets. Big markets dominate national trends and purchasing a home is becoming inaccessible for all but the wealthiest city dwellers in many urban zip codes, Oregon’s super nova market in and around Portland is no exception. The idea that renters are eschewing owning homes due to personal preference is a bit outlandish in my opinion. I think it’s human nature to mask a forced decision as a choice in order to stay positive about the situation, but there are some key reasons renters are “choosing” not to buy.
First, the last several years have had some of the lowest interest rates on owner occupied residential in U.S. history and that inflates price. More Americans are moving into the biggest cities than ever in our country’s history and so we also have increased demand. Wages have been stagnant in many sectors for nearly 15 years, which paired with inflation gives the average home buyer less purchasing power. So, I don’t think we’re looking at renters who like the flexibility or lack of capital investment in up keep of home ownership, but truly don’t have the ability to comfortably own a home. If we look at that in combination with the fact that employees change careers and workplaces at a faster rate than we’ve ever seen then it is easy to see why renting seems like a smarter “choice.”
The article references Millennials and student loan debt as another reason that homeownership is becoming less accessible. Boomer clients, especially those without children or whom were generous enough to pay for their childrens’ higher education sometimes find student loan debt difficult to understand. Why is it different than credit card debt, a mortgage, or a car payment many ask? Unlike other forms of secured debt student loans are rarely forgiven in bankruptcy (dischargeable). So, graduates will prioritize staying current on those loans in order to avoid garnishing of wages.
To each their own, but the disturbing echo in many comments coming from real estate pros concerning this article is in the focus on how it effects our industry and not how it effects our society. The vast majority of home loans are guaranteed by the Feds in the form of Fannie Mae, Freddie Mac, Ginnie Mae. The mortgage interest deduction is the largest line item deduction for most middle class Americans. If we cannot grow home ownership between what most would consider pretty extreme measures of incentive, such as no or low down payment are we losing the war?