The Commerce Department reported the percentage of privately owned homes in the U.S. slid in the second quarter, but rental vacancies held steady. Many adults are no longer interested in owning a home and are perfectly happy just to rent, especially since many home owners lost equity in the recession. At Trulia.com about 30 percent of visitors are “crossover” home shoppers looking at both ownership and renting at the same time, says Tara-Nicholle Nelson, a Consumer Educator for the company. “This is very new,” Nelson says. “This represents a wholesale rethink of whether the American dream includes homeownership.” To help the “crossover” home shopper, Trulia publishes research on the “price-to-rent” ratio in major American cities, comparing the annual cost of ownership to the annual cost of renting comparable condos/townhomes and apartments. While consumers use factors aside from cost to make their decision, Nelson says, the index can give them an idea whether ownership and renting conditions are improving or worsening over time.
The current homeownership rate of roughly 67 percent could fall to 62 percent over the next two to three years, according to John Burns, Chief Executive Officer of John Burns Real Estate Consulting of Irvine, Calif. He estimates that six million of eight million American homeowners currently in default won’t be able to modify or otherwise resume paying their mortgages and will be forced to return to renting. “The wild card is government intervention,” Burns says. The ultimate homeownership rate could be affected by how the government addresses the role of government-controlled mortgage companies Fannie Mae or Freddie Mac. Burns says that his research indicates once consumers have seen the market behave the same way for three or four years straight, they assume it will stay that way forever. “When housing bubbles burst, homeowners think of real estate as a poor investment,” he says. “It may take awhile for this idea to work itself out of the collective psyche.”