When I was a kid, there was such a thing as the “American Dream”. This dream involved finding a good job, and one day owning a home to raise a family in. In recent years, that dream has changed, and now owning a home is not as important as it used to be.
There are many reasons why people are opting to rent as opposed to buying a new home.
One reason is that as a nation we tend to move around more than we used to in the past. It is not uncommon for people to change jobs every few years, and as a result do not want to get tied down into a home that they may or may not be able to sell.
There is also the overall health of the housing market to consider. The recent recession hit the housing market hard, and a lot of would-be homebuyers are still a bit weary to jump into the market. There have been too many stories of foreclosures and underwater mortgages. Everyone knows at least one person that owes the bank more than their home is worth, and as a result are hesitant to buy a new home.
While banks have been loosening their lending standards a bit as of late, they are still tighter than they have been in the past, which also cuts back n the ability of some people to buy a new home.
As a result renting is the new norm, and consequently rents have been rising. Rental properties are becoming the new asset class, with several big companies trying to capitalize on the new trend.
Asset management group Blackstone Group (BX) has been buying a lot of rental properties, and today homebuilder Lennar (LEN) announced that it was branching out into rental properties. For the nation's third largest homebuilder to make such a move is a strong testament to just how important the rental market has become.
During the company's fourth quarter earnings conference call, its Chief Executive Stuart Miller stated that Lennar is seeing improvements in the housing market, but expects the recovery to be held back by tighter lender standards, and will result in more families opting to rent instead of buying in the years ahead.
Lennar is the first of the major homebuilders to look at rental properties as a potential profit driver, but you can expect to see more companies follow suit if housing market conditions do not drastically improve in the near future.
The rental market used to be dominated by small investors, but the landscape is shifting and a new asset class is being formed.
The “American Dream” is far from dead, but buying a new home is just no longer part of that dream… at least for now.