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Housing declines could lead to more rentals

Declines in the housing market might encourage Americans to rent instead of buying.

Declines in the housing market might encourage Americans to rent instead of buying.

With housing declines continuing to plague Americans, the real estate market might see an increase in the number of apartment rentals by the younger generation.

Federal Reserve Bank of St. Louis President James Bullard recently said the 30 percent drop in U.S. housing prices since 2006 might result in a generational shift to apartment rentals. Younger generations are opting to save money through renting as opposed to pursuing home ownership.

“My sense is that the housing debacle of the past five years may have scared off a generation of potential homeowners,” Bullard said recently in a speech in New York. “New homebuyers likely see homeownership as a fundamentally riskier proposition than earlier cohorts and therefore may be far more likely to rent rather than own.”

Ben Bernanke, Federal Reserve president, recently told homebuilders in Orlando, Florida, that the U.S. recovery has been frustratingly slow because the weak housing market is holding back consumer spending.

Bullard added that monetary policy that was formed to lower interest rates and promote borrowing might not fit into Americans' financial means at a time when families are trying to reduce debt.

According to the National Association of Realtors, January pending home sales have shown positive numbers, which is evidence Americans are packing up and taking advantage of the housing market.