05/08/2014 05:31 pm ET Updated Jul 08, 2014

Challenges to the American Dream

Our grandparents and the baby boomer generation have enjoyed the American Dream of homeownership, and they've by and large been rewarded with increasing values and the forced savings of mortgage payments. That's at least until 2007 or so. However, even then, if homes were owned for a number of years prior, they're now seeing some improvement in a recovering market.

What is the future for the dream of homeownership these days? Actually, it may not be the fact that the dream is alive but unattainable. It may be more that the dream isn't as big a deal to the younger generation. There are divergent opinions, and it's probably a bit of both. Many younger Americans living at home with parents would love to own a home but can't due to rising student loan debt and lack of a down payment.

Owning a home may be desired, but the younger generations have some harsh economic realities to overcome. Gone for most are the days of getting a job with a large company, working for 20 years and retiring with a nice pension. The loyalty of company-to-employee and vice versa just isn't there anymore. Along with shorter employment duration comes shorter residence in the area in many cases. People are moving more often and farther away for work.

Recent surveys are yielding some interesting responses from the younger generation when they're asked about renting versus owning. Right now, with lower prices and interest rates, rent-versus-own ratios in most areas show that it's cheaper to own than to rent. Even so, younger workers and professionals are renting anyway. Even those who can afford to buy and have a down payment aren't doing so. When asked, their attitudes revolve around:

1. Little confidence in their long term employment prospects.
2. They anticipate that they may have to move away if their job or employer changes.
3. Even if home values are rising, it can take at least five to eight years in many cases to recoup the costs of sale through equity appreciation.
4. If they rent, they can upsize for family or other reasons every year. If they buy, they would probably oversize their home selection to anticipate future needs due to item 3.

While lenders are loosening up a bit, there are still plenty of unanswered questions about the future of Fannie Mae and Freddie Mac. The role government will have in mortgage guarantees going forward is unknown. Mortgage lending is a competitive business, though with far fewer major players than before. However, without some guarantees to cover losses due to default, lenders will raise the barriers to getting a mortgage and/or increase interest rates to offset risk. All of this uncertainty is helping to depress desire for home purchases.

There has been increased interest in lease purchase of homes, mostly spurred by the ability of real estate investors to do "sandwich leases." They can take control of a home from a motivated seller and place a tenant buyer in it for a monthly cash flow profit and a profit if both purchase options are exercised. The investor has no obligation to buy, so they aren't at risk if their tenant buyer decides not to do so. If more consumers learn of lease purchase options, there could be an increase in demand from buyers. They can enter into a lease purchase, usually for three to five years, an acceptable window in today's uncertain employment world. They have the option to purchase at or before the end of the lease, but not the obligation to do so.

The American Dream may not be dead, but it's ill and needs some TLC from the economy. If the economy begins to improve and buyers perceive it to be sustainable, they may just start dreaming of homeownership seriously again.