How to Profit From a Nation of Renters

Our government has done just about all it can to encourage homeownership in this country, but strategists question whether Uncle Sam is waging a losing battle.

Specifically, market pundits wonder whether we here in the US are now going to transition into a nation of renters. Perhaps the new American dream, these pros posit, means renting a two-bedroom apartment rather than buying that McMansion with the spiral staircase and heated hot tub. (See also, Real Estate Bubble Explained in 30 Seconds)

If so, and investors agree that such a socioeconomic change is taking place, what are the actionable ideas to profit from this powerful shift?

Without a doubt, the US government is desperate to boost real estate. The $8,000 tax credit has been extended to May 1 for signed contracts by first-time homebuyers, with closing by July 1. In addition, a $6,500 credit is available for certain repeat buyers.

Still, as the Wall Street Journal recently pointed out, the US home-ownership rate has charted its biggest decline in more than two decades, falling to 67.6% as of September from a peak of 69.2% in 2004.

And more renters are on the way: Credit firm Experian and consulting firm Oliver Wyman predict that "strategic defaults" by homeowners who can afford to pay are likely to top one million in 2009, more than four times 2007's level.

In short, Americans might be reconsidering how they think about that dream of a swimming pool and white picket fence that they can call their own.

Gluskin Sheff’s David Rosenberg points out that homeowners’ equity as a percent of household real estate was revised in the first quarter to a new record low of 33.5%. It has since rebounded in the subsequent two quarters to a merely hideously pathetic 38%, writes the market guru.

“As a societal matter, this calls into question the appeal of homeownership,” Rosenberg wrote.