by Matt Delaney
Nearly a decade after the Great Recession materialized, the housing market that spurred a worldwide economic downturn still struggles to strike an affordable balance in the U.S.
ApartmentList.com’s report, “Homeowners and renters – a widening gap,” details the fallout of the recession throughout American society. Sun Belt cities witnessed decades of rapid economic and population growth reverse course with the onset of the recession.
Young Americans and minorities have been forced into disoptimal housing due to a poor financial climate that lacks the cushion older generations once had. As a result, homeownership in the U.S. has dipped to its lowest level since the mid-1960s while rents ballooned by 3.7 percent nationwide.
Those wealthy enough to endure the tough times without losing their home or accruing a mountain of debt are being rewarded with historically low interest rates, dropping median monthly payments for homeowners by 13 percent since 2007.
However, outside of this privileged minority, the vast majority of Americans are encumbered by rising rents in metropolitan areas and are losing out on opportunities to build their wealth.
Disparities between homeowners, renters and the benefits and drawbacks that follow is the principal focus for ApartmentList.com’s director of data science & growth and author of the report, Andrew Woo.
Woo emphasized that while the affluent were insulated from the recession and are now thriving in its dilapidated wake, many Americans remain stuck in the economy’s undertow and far away from achieving a significant milestone in accumulating wealth, purchasing a home.
The divide is at risk of growing larger as both trends venture in opposite directions, and as Woo noted in his report, could lock out the next generation of prospective home buyers.
“Think about [new home buyers] in three groups: college educated without student debt; college educated with student debt; and those without a college education,” Woo said.
“The group without a college education is who I’m most concerned about,” Woo continued. “They lack money for a down payment and don’t receive much [financial] help from family. Most of these Americans are going to find it hard to afford a home in the near future or even beyond that.”
Just over 30 percent of Americans hold a bachelor’s degree, though the job market favors educated employees more than ever in 2016. That compounds the troubles for the third group of home buyers Woo identified, who lack the resources to build fiscal or human capital and, subsequently, are being left behind.
The Washington D.C. metro area is no exception as it’s the third most expensive metro area to live in the U.S. and sixth most expensive in the entire world, dissuading educated and uneducated citizens alike from becoming new residents.
“Affordability is an ongoing issue in the DC metro area,” principal broker for RE/MAX West End, Louise Molton wrote. “If we were to see more new construction aimed at entry-level buyers, that would certainly help increase options.”
It’s a simple solution. However, the construction for new developments is slow-moving.
“In certain [parts] of the DC metro area, there is still high demand for purchasing homes, outpacing supply,” real estate consultant for Keller Williams Realty, Will Rodgers wrote.
“Right the now the flexibility of renting is worth the premium for many.”
For want of flexibility, Washingtonians have been hit with a 12.5 percent increase in renting costs since 2007. Still, D.C.’s sophisticated job market makes life easier for those willing to endure a high cost of living.
Woo, Molton and Rodgers all noted that the federal government’s presence shielded locals from the brunt of the recession, allowing D.C. to defy national trends such as the loss of homeownership, especially among minorities.
Homeownership in D.C. has actually flourished since the recession according to senior loan officer of First Home Mortgage, Ana Tolentino.
Although when it comes to who is or isn’t buying those homes, the privileged minority of wealthy Americans are claiming their lion’s share.
New loan guidelines demand strict payments from clients with student loan debt, while many other indebted candidates can’t qualify for a loan.
Basically, opportunities to gain wealth through home-buying are shrewdly dealt to those outside of the area’s upper crust.
What a tangled web we weave. People spend money to make money in regards to an education, but are punished by the housing market later for investing in their future. It’s hard to knock financial institutions for being sheepish – faulty loan recipients aided the market’s crash in 2007.
However, it asks the question: when will the gap between renters and homeowners shrink in the D.C. area?
“The gap will always exist,” Tolentino wrote. “Education [about loans] and preparation will be the best weapon against a gap for those looking to become homeowners.”