Dropping homeownership is leaving millions of Americans stuck in rental housing — a trend that some say has big implications for the marine industry.
Homeownership rates have dropped to historic lows, prompting the middle class to feel the strain of rising rents, according to a report released last Wednesday by Harvard University’s Joint Center for Housing Studies.
“We have seen improvements in housing, but I have said all along that new-boat sales will not reach their full potential until we see a full recovery in housing,” National Marine Manufacturers Association president Thom Dammrich told Trade Only Today.
In contrast to falling homeownership, rental markets continue to grow, fueled by another large increase in the number of renter households, according to a release announcing the study results. However, with rents rising and incomes well below prerecession levels, the United States is also seeing record numbers of cost-burdened renters, including more renter households higher up the income scale.
That could be mirrored in the rise of boat clubs and peer-to-peer boat companies.
“I believe that many of the same principles that pertain to the housing collapse translate directly to boat ownership,” Freedom Boat Club president and CEO John Giglio told Trade Only. “Consumers are looking for alternative means of getting on the water. Freedom Boat Club memberships have exploded over the past five years as a result of the economic downturn.”
The nation’s homeownership rate has been falling for eight years and was down to 63.7 percent in the first quarter of this year from a peak of more than 69 percent in 2004, a New York Times report said about the study.
But even as the market continues to improve — sales of existing homes rose in June to their highest level in nearly 8-1/2 years, the National Association of Realtors reported last Wednesday, and first-timers make up 32 percent of the buyers — it is leaving millions of Americans unwillingly stuck in rental housing.
The flip side of the decline in homeownership is a boom in rentals and a significant rise in the cost of renting. On average, the number of new rental households has increased by 770,000 annually since 2004, the center’s report said, making 2004-14 the strongest 10-year stretch of rental growth since the late 1980s.
“As difficult as banks made the mortgage process of purchasing a home, they were even more stringent with boat financing as a luxury item,” Giglio said. “Again, this has served as a major driver to the increase in our business. Consumers did not want to give up boating, even though many had to give up on boat ownership.”
People in their 40s and 50s have been hit particularly hard by the housing bust, according to the New York Times story — the average age of new boat buyers.
“It’s interesting to speculate how this age group views boat ownership with the loss of equity in home property,” said David Scott of Martin Flory Group, the firm that handles public relations for peer-to-peer boat company Cruzin. “Factor in the overwhelming adoption of both new technologies and social media, and it’s no surprise that boat-sharing is booming. Owners look for a way to offset costs and keep their boats and homes. Those who are trying to get out from under a mortgage rent until such time that they can afford to buy.”
However, Dammrich said the drop in homeownership is indicative of a struggling middle class, which ultimately is bad for the industry.
“The middle class has not recovered completely, and that is certainly a headwind for new-boat sales, but also a headwind for boat clubs and rentals,” Dammrich said. “I don’t know the facts on this, but I suspect that most folks in boat clubs could afford to own and some migrate to ownership after trying it through a boat club. I think a stronger middle class and recovery in the housing market will boost new-boat sales and membership in boat clubs and boat rentals.”