Several developments recently have caused me to consider the possibility that the American Dream of home owner ship may be realized by fewer and fewer Americans.
First of all, although there is mortgage financing available at present, it is difficult to obtain. Even buyers with a good credit score are experiencing increasingly difficult requirements for loan approval.
Secondly, Private Mortgage Insurance Companies are failing because of claims due to foreclosures. A Mortgage Insurance Company insures the borrowers willingness and ability to repay a mortgage loan. If the borrower defaults, the Mortgage Insurance Company protects the Lender from loss if the sale of the real estate that secured the mortgage does not sell for enough money to pay the debt.
If there are no private mortgage insurance companies, borrowers will have two choices, to pay 20% down on a house or finance using FHA or some other government sponsored Mortgage Insurance Program. Very few Americans have cash on hand for a 20% down payment leaving the government programs as the only alternative. If the government programs go the way of the Private Mortgage Insurance Companies because of losses due to foreclosures and falling real estate values, the only alternative will be a cash down payment of 20% which most Americans will not have .
If people can not buy houses, they will be forced to rent houses. There will be no choice, families must have shelter whether it is owned or rented, If it is not financially possible to own it, it must be rented.
Actually, there is thought that owning a home will not be as good an investment in the future as it has in the past. One thing is sure, we can no longer guarantee that real estate values will climb, at least for the next several years.
Also, there could be thought that the flexibility and variety of renting rather than buying is attractive. One can choose to find a new place to rent and choose not to renew a lease at the present residence much easier than to sell a house and buy another house, especially as things are now in the current housing market.
Owning a home has always been considered a leading indicator of financial strength. There is always that question on any credit application, do you own or rent? If more and more people are renters, either by choice or necessity, it will probably be that the idea of renting will be more and more acceptable and will not be the requirement for positive assessment of financial strength as in the past.
Difficulty in obtaining mortgage financing, no guarantee of increased value, flexibility in changing residences easily and a changed attitude about the financial stability represented by home ownership may change the idea that home ownership is a status to which most consumers aspire.
The equity in a home has always been the centerpiece of the financial holdings of many American families . Are we only a few years away from that not being the case any longer? Are we going to become a nation of renters?
