The GREAT American Dream is…Over!
Generations of the past have long been raised to believe in the financial dream of home ownership!
Work hard, save money, buy your first house, take out a mortgage, pay down that mortgage monthly, derive the benefits of tax write off’s of interest and real estate taxes, enjoy the benefits of appreciation, remodel the basement, move from the starter home to the next level and so on until retirement and cashing in on all those benefits and fulfilling the dream.
Those days appear to be long gone.
Today’s generation lives for renting….Uber, two-year contract with your phone….
Today’s generation doesn’t understand debt….they have too much student debt, saw their parents, or neighbors, or friends’ parents lose their home or go upside down in the 2006 real estate cycle….
Today’s generation lives to be mobile….I am moving to Peoria next week and do not need to be tied down to a mortgage or house that would restrict my mobility
Equity….what is that?
The pipeline of new, young buyers has dissipated rapidly and fueled an entirely new residential real state market.
Subsequently, we have seen the massive new apartment development trend of project, large and small, all over the country.
Instead of buying a starter home and having “all in payments” of $1,500 (don’t forget the write off’s here) for a 3 BR ranch with one car garage, full basement, one bath, built in the 50’s home that needs a little TLC with sweat equity….the new generation is opting for the 1,100 sq. ft 2BR apartment at $2,300 plus parking….go figure!!! It’s got a community room, fitness center, coffee bar and is just plain “hip”!
The residential real estate market was driven by the $100,000 owners selling and buying the $200,000, the $200,000 selling and buying the $300,000, and so on. Now they all sit on their homes as they have refinanced at 3.5% and would rather put a small addition on. The market has dried up because there is no upward movement as the options to “upgrade” have disappeared. And with interest rates inching close to 5%, who knows that it may all come to a halt.
Do not forget that interest rates and values are in INVERSE proportion…as rates go up, values decline. With rates going up, it means the buyer can afford less and that is a double whammy for the market!
The bottom line, it may sound pretentious and self-serving, but the conclusion in all of this arguably may be “Landlord is King!”