The following graphic summarizes the U.S. housing market. The red boxes are a small percentage of the total, yet are receiving all the media and political attention.
Let’s not forget the overwhelming positives:
- 22% of American households own their home free and clear of any mortgage
- 34% of American households own their home and have equity in it
- 34% of American households rent
Of the 40.6 million who rent:
- 42% rent in a small apartment building
- 27% rent a single family home
- 20% rent in a large apartment building
- 6% rent a condo
- 5% rent a mobile home, boat, etc.
So I have a few questions:
- Why are some of our leaders asking 90% of Americans to bail out the 10% who have no equity in their home?
- What happens when the 1.5 million excess vacant homes are filled, which is already occurring in many neighborhoods across the country?
- Why is the apartment REIT market so popular with institutional investors, when it is less than 20% of rental units?
- What happens when the family renting a home for $1100/month cleans up their credit and buys the same home with a mortgage payment of $800?
Americans make astute financial decisions, at least in the short-term (our addiction to debt will hurt us in the long-term). We will bailout very few homeowners. We will increase construction by building in the ever-increasing number of areas that need homes and builders can make a profit. We will figure out how to make portfolio investments in the massive single-family rental market. We will buy homes if it makes financial sense for us to do so.
I am reminded of a famous Winston Churchill quote: “You can always count on Americans to do the right thing – after they’ve tried everything else.” The excesses from the housing bubble are gradually clearing.