The hits just keep on coming. According to the latest Beracha, Hardin & Johnson “Buy vs. Rent Index” (bet you didn’t know this existed), the housing market is now trending more toward renting than buying (Rent vs. Buy).
The American Dream of homeownership is shifting toward a dream to rent. What does this mean for mortgage lenders? Is America no longer the land of opportunity? Did you know you can’t say so at the University of California? (Read This). Another whole story, but don’t get me started.
Already hit with a stagnant economy, increased regulation and enforcement, lenders are now faced with a changing dynamic in home buyer. There are still plenty of people out there, regardless of what these studies might show, who desire and will work toward homeownership. It’s more than a simple investment, it’s a place to raise a family and put down some roots. An investment one can use and enjoy while still realizing some returns through equity.
The study says that in many cities the difference between the total cost of owning a home, versus just renting one, works in the consumer’s favor. They can invest the difference and realize a better gain over the projected equity buildup. Maybe – but that means they need to understand the markets, hit it right most of the time and have the intestinal fortitude to stay the course. Not an easy task for even the most experienced investor.
I believe people will always want to own their piece of the American Dream. They want to put down roots and raise a family and they expect they will earn some equity. After all is said and done, they will own their home and show some reward and return for all the hard work. That’s gratifying.
For a time many may choose to rent for a myriad of reasons but I don’t believe it is because they view renting as a better investment or wealth builder. In time, they will want to own. Just my opinion and I’m sticking to it.
For now, people are still buying homes and they need financing. If renters increase, then there will be buyers for the investment properties for these people to rent. The thing is, there are still plenty of opportunities to lend. Lenders need to be ready to meet the demands, whatever they are. Training, systems, technology and teamwork will go a long way toward success.
Are you prepared to meet the needs resulting from a changing economy? Are you sure your people and processes can help you do it? Oh, by the way (hate to bring it up), are you ready for TRID?
The game keeps changing; you need to play different to keep up.