Opportunities for getting rich amid the decline of domestic real estate

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The real estate market in the United States is still falling.

As shown below, according to data from the U.S. Department of Commerce, the U.S. homeownership rate has dropped to its lowest point since 1997, at 65.4%. At the same time, the median unit rent for vacant homes continues to rise.

Yes, the United States is changing from a society of owners to a society of renters. American households are still undergoing painful deleveraging. To understand what deleveraging is, first understand what household leverage ratio is: Household Leverage Ratio = Total household debt/ Disposable household income. American households borrowed too much, so the leverage ratio was too high. In the past, American households could easily obtain debt financing because the value of their main collateral, such as real estate, was strong. Now that the value of real estate has shrunk severely, the burden of debt can only be alleviated by selling real estate and other collateral, which has further worsened the disadvantage of real estate prices. Therefore, the economic crisis in the United States is also a crisis of ownership.

It may take about 6 years for American households to deleverage. Under such circumstances, the recovery of real estate is destined to be a long and painful process.

But smart people who dream of getting rich don't have to wait that long, because the ownership is sold at a low price, and then the leasehold rights will rise. Ownership and leasehold rights can be hedged. A classic case here is Zipcar, a famous American car rental company. Zipcar was founded in 2000, but unfortunately its performance has always been mediocre, because Americans have always despised people who rent cars to live their lives. As a result, Zipcar hit a good opportunity - the 2008 economic crisis, and has since embarked on a road of rapid growth: from only 225,000 users in 2008 to 650,000 users and 9,500 vehicles in November 2011. Amid the success, Zipcar was successfully launched in 2011, and the ugly daughter-in-law finally became a mother-in-law.

The cost of owning a car is the second largest expense for American households, accounting for approximately 16% of total expenses. Including car loan, depreciation, maintenance, insurance, taxes and gas, an owner of a midsize car who drives 15,000 miles per year spends $8,588 on their vehicle annually, according to AAA. So when the 2008 economic crisis opened the floodgates for American households to deleverage, the car market began to stagnate, and Zipcar took off.

It seems that the economic crisis is not a tragic story. For example, "Detroit cried to death, Zipcar laughed to death" is proof.

An irresistible trend is that the United States is changing from a world of "owners" to a world of "renters". And it’s not just cars and houses, this trend is spreading in every possible way. For example, students are gradually giving up owning textbooks and turning to renting them. Now there is even a book rental business based on Kindle and iPad.

If smart businesses seize this trend, they can copy the success story of Zipcar. This is an alternative prosperity in the decline of the United States.