By Kevin Chiu
Who could deny lyrics like, “I love you, yea, yea, yea?” It was the heyday of the Beatles. Andy Griffith was walking his beat in Mayberry. Donna Reed made primetime television fun and the Hippie era made life interesting.
The 1960’s have a memorable nostalgia in Americans hearts– The good ol’ days of the past. It was also man’s first voyage into space, and talk of computers that would run the world.
The long lost era of slower, simpler times may be returning at least in some ways to America as housing values erode and foreclosures pick-up speed. It was an era that never saw hyper-housing inflation anywhere in the country, but it was also a whole different economy.
The average salary was a fifth of what it is today. The average home sold for less than $20,000. People didn’t buy homes as investments. They bought them as a place to live in and keep out of the elements and to be warm at night.
Investment real estate was left up to commercial buildings. There were fewer people to invest in real estate and fewer yet saw housing as a good investment on a return ratio. Year’s later bankers offered creative mortgages to sell more loans and draw mom and pop investors back to the closing table to buy houses.
The very thought of housing deflation hitting 60’s levels freezes the thought processes of millions of Americans, and may be scaring some from even spending much money at retail stores. The run-away housing inflation that produced so much wealth between 2003 and 2006 is long gone, and markets are adjusting to lower home prices. Foreclosures have brought out investors in mass, reducing inventories to pre-bubble levels in some especially hard hit markets not that the foreclosure epidemic is over by any means.
But there is a growing segment of people in America that believe housing prices will drop drastically and markets will change all over the country to a 1960’s sort of era. University of Southern California housing demographer Dowell Myers says more and more people will be renting as a result. “We’re returning to what was normal in the 1960s,” said Dowell.
More people will be renting homes in the next five years than we have seen rent since the 60s, academicians say and many will be renting because they want to. Others fear becoming a victim of foreclosure and still others will be forced to rent with credit so tattered they’ll be unable to qualify for a mortgage.
Housing deflation has rocked prices, slashing home values by as much as 70% in the hardest hit areas. Detroit has already seen its average drop 45% and thousands of homes still sit vacant in Detroit awaiting the foreclosure process to be complete. An estimated 1.4-million homes are awaiting foreclosure nationally by mortgage servicing companies, which have been holding off foreclosing until more government plans are announced to bring about solutions to the crisis.
So what’s the likelihood or bet that home prices will drop to 1960 levels? “About 5 to 10%,” says Housing Predictor economist John Hines. “There are more than two and a half million vacant homes now and accounting for inflation prices just can’t fall to those levels without the government stepping in to handle all the mortgage lending. It would simply ruin the American economy.”
The rate of home ownership hit its peak in 2004 at 69%, the highest in U.S. history and has been falling ever since. One study projects the rate of home ownership will reach less than 60% by 2015. With numbers like we’ve seen renting may be more appealing for a long while.