Housing alone cannot save the American economy. Whereas it is an integral part of the consumer persona, relying on home ownership as a baseline cornerstone to modern economics is a misnomer.
Pre-recession, the home ownership rate peaked at just over 70%. For decades the economy has relied on housing to pull it forward out of recessionary cycles, as a job creator and bellwether of better times. As Reinhart and Rogoff state so aptly in their book- This Time is Different (This Time Is Different: Eight Centuries of Financial Folly). While housing is a major component of the economy, housing cannot save the American Economy.
The wealthiest farmer in Tyson’s Corner Virginia built his fortune buying land by the acre and selling it by the square foot. Land ownership is not a new concept, land ownership by the square foot is, however.
Economist suggest that nearly seventy percent of the economy is driven by consumers; consumers that buy stuff. One of the things consumers buy is housing. Home owners buy even more stuff to enhance the value of their investment.
Most of us can remember being in our grandparents home. Most of our grandparents owned homes. But thinking back two generations prior to your grandparents, aside from family farms, do you know if your family owned a home? In the 1800’s most of America was open space with “homesteads” in the west and large land owners otherwise.
On large working farms and ranches housing was part of payment for work. In cities, there was a great deal of “company housing”. Rental housing ownership was concentrated also. Unlike voting, home ownership was, as it is today, a privilege- not a right.
As the home ownership rate drops, there are fewer “homeowners” in need of paint, shrubs, shiny appliances and new windows. Thus, this impacts the economy because renters and multifamily property owners are far less likely to spend on such things as do homeowners.
The United States has strong and longstanding institutions in education, science, medicine and government. The United States has a well established force of law, property rights and a compelling social safety net un-matched by any country of similar size.
This is a great country. To retain our greatness requires continued evolution in and expansion of our intellectual capacity to identify, build and implement avenues to extend plausible economic growth. This is a collective effort requiring participation from all segments of the economy- not just housing.About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. We discuss best practices in multifamily management and methods related to how to buy apartment complexes. Our focus is sharing strategies and tactics that can be implemented and measured. For more information, visit: www.MultifamilyInsight.com