During the past 3 years our country has fallen to its economic knees due to a crisis in our banking system brought about, in large part, by the collapse of the U.S. housing market. And while there are several complex precipitating factors to the current recession, some of which may never be fully revealed, the concept of home ownership has become to be viewed as a villain, for some a ghoulish nightmare, and for many, a less desirable goal for the future.
With millions of homes lost to foreclosure and millions more worth less than their mortgage, many are questioning whether owning a home should have been designated “an American dream.” Some, in fact, seem to view their homes as thieves who have stolen much of our nation’s wealth as well as the dignity of a large group of its citizens.
This questioning of the value of home ownership has been precipitated by continual waves of constantly changing headlines and news stories, each attempting to eclipse the last. A recent cover on Time Magazine featured an article, “The Case Against Homeownership,” describing ownership’s “dark side.” The article describes the damage done to individuals and to the economy as a result of home purchases.
However, home ownership hasn’t changed; and it didn’t create the current crisis. Of itself, it has no “dark side.” That view came about as a result of poor guidance from our “leaders,” combined with the greed of bankers and Wall Street firms, drooling over the prospects of billions in profits. And millions of consumers contributed to that view by abandoning rational thought and readily accepting the notion that a home purchase could be an automatic ticket to “Easy Street.” Just like crazed “investors” in the late 1920’s, we ignored the adage, “If it looks too good to be true” . . .
Housing implies a home. For some that may be a rental, for others a purchase. And though a purchased home does come with some advantages, it also comes with responsibilities. And the first responsibility is to determine the logic and prudence of that purchase. Sure, buying a home may serve as a way to create a forced savings account. But, it’s not a typical investment. Similar to an account at your local bank, the home account may offer little interest. Studies comparing home prices over the past hundred years show that, on average, those prices follow the rate of inflation; at times up; sometimes down, but generally following the inflation trend line.
The important point for us to remember is that HOME is still the same as always; its only dark side is one created in ignorance and greed. Ownership is not inherently sinister or damaging to the economy; though the irrational behavior of owners and enablers can make it appear so. Today’s home is no less desirable and comes with no more risk than it has in the past—as long as we continue to exercise good judgment and rational thinking.
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Newly released Census data shows the average price of a home over the last 10 years went from 62000 to 104 nationwide while rent went from 400 to 800 amonth. Nuf Said
Let's hope common sense returns and the decision to puchase a house is based on personal needs and financial ability to pay the mortage rather than greedy business tactics.
Charlie - Ownership does allow one to avoid the possibility of rent increases, just another advantage.
Norma - We can hope.
That article sure came out of left field, IMHO. I commented on another post about it that I'll bet the author of that article most certainly owns a home, so I don't understand why she's writing all the doom and gloom. Is she gonna sell and start renting?? Highly doubtful...
John....we are reading the same book and even on the same page.....The education of Real Estate continues and it is no respecter of persons......
Pat & Wayne - It's obvious that many made unwise housing choices during the past few years, but that doesn't indict the process, just those involved in the poor choices.
Richie - I agree.
John, The image gives me shivers.
For years, I found a part of me resisting Robert Kiyosaki's admonishment that your home is a liability not an asset. He nailed this slide in RE values long before it happened.
John, I have to agree. Homeownership is not the villain here, poor judgment, greed and lack of accountability is.
Kate - While many of us in real estate have made money from the sale of a home, it's never a guarantee. I've always done quite well, but then, that's my business.
Sue - And poor judgment on the part of all involved.
People are disenchanted right now. The economy leaves alot to be desired, people are losing jobs and there isn't an answer in sight right now. History repeats itself and values will again go up and the American Dream will be reborn. Time heals all wounds.
John, great way to put home ownership in to it's proper perspective.
Pat - The dream is still there for those who understand the meaning.
Robin - Thanks for the visit!
John, Great post, thank you for calling a spade a spade.
Rich - Thanks for the comment.
Very well said. It is amazing how now developing an asset as a place to live (not an investment) is a dark thing. Who are they trying to sway?
Jay - Get ready for "rental" America.
John,
Wall Street was largely behind the current mess and the rules were changed in the new legislation, hopefully enough to prevent this from happening again. Time will show.
Esko - I agree and Wall Street let it get out of control as they chased ever growing profits. While we'll probably not see this again in housing, the same scenario will resurface somewhere.