It’s been 50 years since so few Americans have owned their own home. Let’s call this the “real” homeownership rate, defined as the percentage of US households who own a home and are not three months or more behind on mortgage payments. Is the suspense killing you yet? Once we take the delinquent status out of the mix, the homeownership rate in this country has plunged to 62.1 percent, according to John Burns Real Estate Consulting. This is down from a high of almost 70 percent eight short years ago.
This is bad news, right? If you are a homeowner who has already lost your home to foreclosure, is in danger of doing so, or simply can’t afford the increased down payment required by lending institutions, yes, this is bad news for you. But, as Jason Hartman reminds us, there are two ways to look at almost everything.
For income property investors, a low homeownership rate means that more people are renting. The simple law of supply and demand tells us that this is good thing. When an ever-increasing demand interacts with a stable supply, what happens? Prices go up! That’s why landlords have been able to ask for and receive higher monthly payments as the foreclosure crisis continues to shake itself out.
When it comes to housing, we’re talking about a term Jason Hartman likes to refer to as “universal demand.” This simply means that housing is something most of us consider non-negotiable. We don’t like laying down at night without a roof over our head, and will go to nearly any length to secure it. In some climates – think Alaska or mosquito-infested, sultry south Florida – your actual life could be in jeopardy without the climate-controlled protection of some sort of house.
Universal need is what makes real estate, especially income producing single family residential properties, such an excellent investment choice. Think about it. Do you actually need those 15 shares of Amazon or Google stock? Not really. Though they might deliver a profit eventually – and they just as easily might not – the bottom line is that real estate has historically always been the best investment you can make with your portfolio because of universal need.
Your next best selection might be gold, but despite the gold bug frenzy in the media over the past decade, this precious metal also pales in comparison to income property for one very obvious reason. Have you ever tried to rent gold out to someone? The odds are high you’ll find few takers. (Top image: Flickr | tachyondecay)
The Jason Hartman Team
