The American Dream Gone Bust

The quintessential ingredient in the stew that makes up a thriving housing market has been evaporating in America. And a recent phenomenon has taken over: private equity firms, REITs, and other Wall-Street funded institutional investors have plowed the nearly free money the Fed has graciously made available to them since 2008 into tens of thousands of vacant single-family homes to rent them out. And an apartment building boom has offered alternatives too.

Since the Fed has done its handiwork, institutional investors have driven up home prices and pushed them out of reach for many first-time buyers, and these potential first-time buyers are now renting homes from investors instead. Given the high home prices, in many cases it may be a better deal. And apartments are often centrally located, rather than in some distant suburb, cutting transportation time and expenses, and allowing people to live where the urban excitement is. Millennials have figured it out too, as America is gradually converting to a country of renters.

So in its inexorable manner, homeownership has continued to slide in the third quarter, according to the Commerce Department. Seasonally adjusted, the rate dropped to 64.3% from 64.7 in the prior quarter. It was the lowest rate in the data series, going back to 1995 (not seasonally adjusted, the rate dropped to 64.4%, the lowest since Q1 1995).

This is what that relentless slide looks like: