"The psychology of the consumer has changed 180 degrees from the bubble," says Ric Campo, the boss of Camden Property Trust, an American real estate investment trust specializing in multifamily residential blocks. If homeownership was the American dream before the bust, lots of people are now waking up to the benefits of renting.
Until the bubble got going, the "move-out rate" (the percentage of Camden's tenants leaving their apartments each year to buy homes) was about 12 to 14 percent. That rose to a peak of 24 percent when, as Campo puts it, the banks started lending to anyone who could fog a mirror. It is now down to around 10 percent. An analysis of relative returns from homeownership and a portfolio of other investment assets by Eli Beracha of East Carolina University and Ken Johnson of Florida International University suggests that for most of the past 30 years it would have made economic sense for Americans to rent rather than buy. Their study necessarily makes lots of heroic assumptions -- most notably, that renters will be utterly disciplined about investing the cash they save by not buying a home. Still, it is a useful corrective to the widely held belief that renting is a waste of money.
Political rhetoric in favor of homeownership has fallen silent. Other countries have achieved the same or higher rates of ownership as America without destructive government subsidies. Plans to wind down Fannie Mae and Freddie Mac, the government-sponsored mortgage giants, are now on the table. If more people rent, house prices should become less volatile.
The social rationale for encouraging Americans to buy their homes -- that ownership makes for more engaged citizens whose children do better at school -- looks weaker than it once did. A 2009 paper by David Barker of the University of Iowa and Eric Miller of the Congressional Budget Office points out that many of the "benefits" of homeownership disappear when other variables, such as employment, are controlled for. In a separate piece of work, Grace Bucchianeri of the Wharton School of Business found little evidence that homeowners were happier than renters.
Whether any of this justifies talk of a "rental nation" is doubtful. America's homeownership rate has dropped from 69.2 percent at its peak in 2004 to 66.5 percent in the fourth quarter of 2010. That is its lowest rate since 1998, but it is still a long way from that of Germany, which was only 46 percent in 2007. Switzerland's figure is even lower.
These gaps reflect entrenched differences. Some of them are cultural.
"A commute of an hour is unacceptable in Germany," says Sascha Hettrich of King Sturge, a property adviser in Berlin. That pushes people toward the rental apartments that predominate in city centers, especially when, as in Berlin, rents are very low. Other factors are institutional. German mortgage lending is a pretty conservative affair, making it hard for people to get onto the ladder without lots of cash to put down. And German tenants get plenty of protection from their landlords. Leases are open-ended, and rent increases are controlled by a system pegging rents to those charged for comparable properties. Conservative investors feel safe in the knowledge that demand for properties is high and income is stable.
In America, the crisis marks a structural change for a group of consumers who should not have bought properties in the first place and will not be able to in the future.
But homeownership rates are unlikely to drop much more, not least because lower prices have made houses more affordable. Beracha and Johnson feel that buying just now makes more financial sense than renting. John Paulson, a hedge fund manager who made billions betting against the housing market, urged people to get back into the market:
"If you don't own a home, buy one. If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home." Assuming you have the cash.