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The American housing market is looking better. That’s not entirely surprising, given that there was nowhere to go but up after the big bust of 2008. Some indicators — the number of housing starts, for instance — look quite healthy. But a team of researchers from the New York Fed, looking over a treasure trove of new data on the benefits and drawbacks of homeownership, have concluded that the divide between owners and renters is still one of the biggest fault lines in America.
Over the last nine years, the percentage of Americans who own their own homes, typically a marker of middle-class respectability, has fallen from 69 to 65 percent. Moreover, sales of both new and existing homes were about 5 percent lower over the first half of 2014 than over the first half of 2013. There is vigorous debate over why this is the case. The Fed researchers write that the main reasons preventing renters from becoming owners “are weak balance sheets (low savings or high debt), low income, and lack of access to credit.” Lack of desire to own a home doesn’t really factor into it. Nick Timiraos concurs, “The good news from the standpoint of the real-estate industry is that there’s less evidence of a structural shift in Americans’ preference for owning homes.”
The people who can afford to buy their homes these days, Jonathan J. Miller says, are more likely than ever to be wealthy. Seven properties have already sold for over $50 million in 2014, and while these ultra-pricey transactions are outliers, it’s broadly true that wealthy investors are doing better than ever while “the majority of U.S. homebuyers remain dependent on access to credit. And today’s tight lending conditions aren’t expected to ease anytime soon.” Emily Badger points out that the line between owners and renters is becoming more blurred than ever. Neighborhoods that used to shun renters have to get used to a new normal: “Picture low-density, single-family neighborhoods dotted with rentals that look architecturally indistinguishable from the owned homes,” Badger says. This is especially the case in places like Las Vegas, Phoenix, and Florida, which were hit hardest by the housing bust.
So what’s left for the increasing number of renters? One trend that’s been underway for some time is so-called “rental securitization,” in which investment banks and other firms buy rental housing, largely single-family homes, and package them much as they did with mortgages. The New York Times recently reported on how this phenomenon is becoming widespread in lower-income suburbs like Ferguson, the Missouri suburb recently torn apart by protests over the police shooting of an unarmed black teenager. And in cities where single-family houses are rare, Alexis Stephens says, the new trend of “property funds” allows outside investors to put money in the housing stock of once-gritty neighborhoods like New York’s Bedford-Stuyvesant, and reap the profits when prices go up—putting further stress on a neighborhood where “the average monthly apartment rent is up 46 percent over the past five years.” — Jordan Fraade
On to today’s links: