Have Americans woken up from the dream of home ownership? Is renting the new black? As a follower of the battered real estate industry, I have found welcome respite in the news that multifamily property investors are doing relatively well — firms such as AvalonBay, BRE Properties, and Essex Property Trust have reported growth in the first three quarters of 2011.
It’s nice to hear any good news, especially when it could indicate that other property markets may soon follow. (Oh, to be back in the pre-housing crash days of blissful naivetÃ©, when all news was good news!) But what do the numbers really mean? Are we as a nation becomingly increasingly content to rent rather than own our castles?
Real estate magnate Sam Zell thinks so. The chairman of Equity Group Investments and Equity LifeStyle Properties recently said that he believes today’s youth are too savvy to fall for many of the traps that caused the bubble to burst — e.g. biting off more mortgage than one can chew.
Zell, the so-called “Grave Dancer” who has made quite a fortune investing in distressed properties, knows a thing or two about the property markets. As the chairman of Equity Residential, he also knows that multifamily properties are having a bit of a charmed renaissance as consumers have a hard time buying (or keeping) homes. According to the US census, rental vacancies have declined in the past year or so while owner vacancies have remained fairly steady.
However, some say that this is the time to buy a home. Some markets have bottomed out or are near bottom, and mortgage interest rates are still low. And given that property values aren’t expected to drastically fall, a home is still considered a safe investment.
Whether a buyer goes the newly-built route or opts for a broken-in model, it probably doesn’t matter much: both homebuilders and banks are competing with one another to get their inventory off the books. The New York Times has created an online interactive calculator showing that while renting a home pays off for a few years, buying typically pays off rather quickly, after six years.
Jumping into a long-term commitment might not be the way to go for everybody. But for those who are ready, it looks like the American Dream is still a viable option.