The American dream now just a pipe dream for many - The Globe and Mail
Tomer Minuskin builds houses in Nashville, but nobody wants to own them at the moment.
It’s a problem that has dragged down U.S. home builders from coast to coast, as builders try to keep their businesses going while hundreds of thousands of houses are sitting empty as the result of a wave of foreclosures that have devastated real estate values.
His latest property is a bungalow that sits alone on a cul-de-sac, ready for its first occupant to step through the doors and call it home. When it sells, he’ll think about building another. And so on, until the market recovers enough to justify a new construction surge.
But whoever moves into the house isn’t likely to feel the pride of ownership, because they aren’t likely to be owners at all. In a country that was built on a foundation of home ownership, everyone wants to rent. It’s a fundamental shift that threatens to reshape the country’s economic landscape - new houses are a key source of economic growth in any economy and owners have historically been more financially secure than those who’ve opted to rent.
“This way the houses are kept nice, and we can keep building a little bit here and there whenever we manage to fill a house,” says Mr. Minuskin, as he sits in his very quiet sales office.
Data released Tuesday by the Commerce Department highlight the industry’s problems. There was a surge in building permits in November, a 9.3-per-cent jump from October. But single-family home permits increased by only 2.3 per cent, while apartment construction surged 32 per cent.
Last year, builders began work on roughly 587,000 homes, the worst year on record. This year, construction may top 600,000. That’s because the American dream of homeownership has deteriorated into a nightmare for almost 20 per cent of all homeowners, who have run into trouble with their mortgages and become embroiled in bitter foreclosure battles with their banks.
“It hasn’t been much easier for the other 80 per cent of homeowners either, with tight mortgage credit, high unemployment and negative wealth effects limiting the pool of potential home buyers while a massive backlog of liquidations continues to put downward pressure on home prices,” he said.
The difficult circumstances are leading to a rental renaissance that few could have predicted a decade ago. Indeed, the rental market has posted a remarkable resurgence as Americans turn their back on ownership.
“Rental vacancy rates have fallen faster than they ever have, and rents are rising across the country - even in some of the hardest hit areas of the housing and economic downturn,” he said. “Driven by a once again increasing household formation rate, positive job creation and a surge of distressed homeowners forced to move to rental housing, demand for rental units is booming”
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