The traditional “American Dream” of home ownership is becoming less attainable for a lot of Americans. Since the housing crisis in 2007, the process of owning a home has created more obstacles leading many Americans to home rentals instead of purchases (if you want more information about purchasing a home, take a look at our blog from last week here).
What exactly has been the biggest factor to this recent shift in the American Dream?
Government-controlled mortgage-finance company, Fannie Mae, has played a big part in the home rental transition. Fannie Mae recently guaranteed $1 billion in debt collateralized by rental homes owned by Blackstone Invitation Homes Inc. This deal has been great news for Blackstone investors because it is projected to be the largest U.S. initial public offerings of the year. According to CNBC, this deal is low risk with very low loan-to-value ratios ensuring great investment opportunities. This deal alone indicates that the “American Dream” of home ownership will no longer be in reach for many Americans. It also suggests that it is no longer a government priority to aid Americans in the purchase of residential properties. Instead, the focus is on changing the housing market by institutionalizing new investment opportunities.
Renting a house may make more sense for some people. Essentially, the process of renting a home is much simpler than purchasing a home. The prospective renter finds the rental property, submits an application, and then if accepted signs the lease for the term desired. Not to mention, most millennials do not find buying a home appealing due to the increase of student loans, bad credit, or other financial burdens that may restrict them. Also, when you want to move it’s a lot easier to get out of a rental.
With the increase in government-guaranteed securities the rental property market is bound to increase, undoubtedly transitioning the “American Dream” into the “American Rental Dream.”
From the trenches,