America the land of renters?

Wasn’t it less than 10 years ago that former President George W. Bush was hailing the record number of homeowners in America?  Now, post-2006 housing bubble, post-2008 implosion of several prominent financial institutions (hey, remember Lehman Brothers?), post-foreclosures and post-short sales (okay, these are still ongoing), the landscape is quite different.  Many Americans having lost their homes are now renting.  In fact, in some parts of the country, rents are rising and home prices are flat or falling.

Is this good or bad or neither?  Well, if you believe that countless American families over the years have built their wealthy by owning their homes, the growing number of renters is a bad sign.  Books such as David Bach’s The Millionaire Next Door tout the benefits of homeownership.

On the other hand, if you listen to Dave Ramsey or have read his book, The Total Money Makeover, you may consider this growing number of renters a good sign.  Americans, individually and collectively, have taken on way too much debt.  The record number of foreclosures illustrates that many Americans were living well beyond their means.  I am paraphrasing, but Dave Ramsey is an advocate of not purchasing a home if it will require you to spend more than 1/4 of your take home pay.   Dave Ramsey would love for you to purchase your house with cash (without assuming a mortgage).  If you have to assume a mortgage, one should an obtain a 15 year, fixed rate mortgage only.  Dave Ramsey is not a proponent of the 30 year mortgage.  And, of course, you need to have a down payment.  So, in Dave Ramsey’s world, not everyone needs to be a home owner.  There is nothing wrong with being a renter.

As a landlord I’m glad there are renters looking for places to live.  I’ve been renting my condo since May 2005.  I presently am renting to my 5th tenant.

But, with all the foreclosed homes across the country, investors are “swooping up” these homes at rock bottom prices and renting them.  No longer is the  landlord someone who lives in the community, who knows the community, who is known by the community.   Instead it will be a much less personal, business driven relationship.

I recognize that not everyone wants to own a home or can afford to own a home.  I am concerned however about the shrinking middle class.  Home ownership is vital to creating wealth.  There are definite tax benefits, allowing individuals and couples to deduct interest paid on the mortgage.  But, if this tax benefit is eliminated (as some have suggested), will that cause more individuals to reconsider home ownership?  Will America become the land of the very few affluent and the rest of us are nothing but serfs?


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