Friday, May 25, 2007
Home ownership: the American dream?
But is it "ownership" to buy a house with a no money down, interest only loan? That sounds a lot like renting to me, except with greater risk to my credit score and other assets if for some reason I can't keep up with the payments. The fact that my name is on the deed, is that such a great thing that billions of dollars in public funds are allocated to encourage me to sign it there?
Why was this myth created and perpetuated?
Chistopher Westley, writing for The Daily Reckoning, addresses this question in succinct and I thing accurate manner:
Home ownership was the American dream only to the extent that housing protected Americans from monetary inflation. Presidential candidates this year will wax ad nauseam that home ownership is the American Dream and that this dream is now too expensive for average Americans. What they won't talk about is how government policies, and specifically monetary policies, help bring thisI think Westley is correct. Home ownership is seen as virtuous and a goal to be attained because of the financial stability it has historically provided families over the long term. In real return, no one gets rich from a house, but home prices tend to keep pace with inflation over time. Of course if you buy it all with borrowed money, you don't really own it. In today's market "Home Ownership" has lost its meaning, and for many is unlikely to provide the protections it has in the past.
situation about.
What is rarely asked is why home ownership ever became the American Dream. The dream was never so much to own a home for the sake of it. Rather, the real dream has always been to protect wealth from the evils of inflation, and the middle-class housing market generally served that purpose. Housing was the middle class's best hedge against a growing government intent on expanding its scope and power by inflating the money supply.
That won't stop our politicians from continuing to encourage it at all costs, however.
7 Comments:
By 
, at
Fri May 25, 09:44:00 AM:
My [some simplistic / oversimplified] understanding of this government encourage of home ownership is as follows:
1) Lots of economic studies showed that home owners were better off than non-owners on all kind of dimensions
2) In a case of screwing up the direction of causality that can only be described as epic, politicians determined that home ownership was a driver of some of these positive differences.
3) Ergo, we develop all kinds of policies that reward / encourage home ownership.
Maybe I'm just annoyed about some of this is a young renter who missed out on the real estate boom - but it seems to be that attaching such a value to home ownership is a remnant of the last generation's era. In particular, buying a home makes us much less physically mobile than renting. This makes a lot of sense when we expect to work for the same company in the same place for our 40-year careers. But in this generation of career mobility, job-hopping, etc., it seems oddly backward for us to encourage physical immobility as it puts our lives at odds with professional realities.
By , at
Fri May 25, 10:00:00 AM:
Don't worry, there's always another boom somewhere down the road. And I'm not sure how much less mobile it makes us in an average to good market. In that type of market, it might well be easier to sell quickly at an acceptable price than it is to break a lease.
By 
TigerHawk, at
Fri May 25, 11:18:00 AM:
It seems to me that there are good and bad reasons to promote home ownership, as opposed to renting. I think the best argument is that homeowners probably feel a deeper commitment to any particular community than renters, and that probably has some sort of positive influence on "civil society." There are also a lot of negatives. The most serious, it seems to me, is that the various subsidies we provide encourage people to overconsume housing. That is probably bad for everybody but the owners of home construction, fixture, and furniture companies.
By , at
Fri May 25, 08:45:00 PM:
Dear Sirs,
Couching the arguments in financial terms completely ignores the reasons that people want to own rather than rent.
You don't have to worry about the landlord kicking you out when the lease is up.
You don't have a landlord who can come into your house at any time and inspect his property.
You can get new carpets and renovate the kitchen. You can add a den. You can put in a swimming pool. You can put holes in the wall and put in cabinets. And you can do this as long as you pay the rent.
That's why people want to own their own homes.
Regards,
Roy Lofquist
By Cas, at
Sat May 26, 01:34:00 AM:
Roy is absolutely correct.
Having been in the military for so long, renting was usually the ONLY option. It doesn't allow you to "set down roots" in a community, to allow your children to make friends, to show you that voting has consequences.
Also, MOST people would rather live in a place they can fix up as they want, that gives them asense of ownership.
Maybe I'm crazy, but I also notice that when someone owns their home, they take much better care it ("protect heir investment" maybe?) but this adds to the quality of a neighborhood
By , at
Sat May 26, 11:59:00 PM:
Dear Sirs,
James hit the nail on the head. Tigerhawk alluded to it.
Some personal experience. About 35 years ago my wife and I bought our first house in, what was at the time, the Northwest corner of Phoenix. We we were driving around one day and saw a new development by John Long, a man of great stature in Phoenix. John Long built starter houses. My wife said look at those cheap houses, there goes the neighborhood. I said those are owners, not renters.
For thirty five years that neighborhood became more and more desireable. The original owners moved upward and onward. The new owners continued the trend. It was always clean and neat.
A few years back it was redeveloped with very upscale homes. I am sure that most everyone who passed through there found it very rewarding, both financially and as a nice place to live.
Regards,
Roy Lofquist
By Unknown, at
Wed May 30, 09:11:00 AM:
I suppose home ownership may be purely economical to a blue state liberal type, but not in America. It's cultural. Economics has nothing to do with the American Dream and home ownership, except to investors and realtors.
