Home ownership is overrated

WASHINGTON — It took a week for the technicians to fix the air conditioning unit, but I reminded myself that I had faced similar inconveniences in a house I actually owned. The spastic climate systems that go out during extreme weather — the temperatures were in the 90s when it went down — are no reason to doubt the wisdom of renting.

Still, I’ve had trouble getting used to my status as a tenant. I bought my first house when I turned 30 and reaped a tidy profit when I sold it. I bought another house after that, believing that home ownership was the foundation of stability, respectability and security.

You see, I grew up steeped in the property-owning ethic; I was told repeatedly that rent was money wasted. My parents were not only owners of their primary residence but also landlords. They believed in buying property to build financial security.

And they were right — back then.

But much has changed since my childhood. My mother and father lived in the same house for more than 40 years. Theirs was an era of little mobility — a world where workers were employed for life, where only upper echelon executives relocated frequently, where most American homeowners stayed put for 20 or 30 years. (That’s the premise of the 30-year mortgage.)

But that world is long gone, replaced by an era of global labor, unstable job markets and diminished workplace loyalty. Workers will need to move more frequently to keep up with changing marketplace demands.

So the home mortgage that once represented the foundation for a respectable life may now as easily represent a boulder weighing down the highly skilled laborer who needs to live in Knoxville instead of Cleveland. He’s stuck, unable to move because he can’t sell the house. Ditto the upwardly mobile professional who has a job offer in Houston but is underwater on a mortgage in San Diego.

That’s why it’s no longer good national policy for the federal government to encourage home ownership, as it does through generous tax deductions and other programs. It may take years to reverse that policy, given the popularity of the home mortgage deduction and the power of the lobbies who support it, but it’s time for our elected leaders to acknowledge that it needs to go.

The housing crisis has reminded most of us why it’s not a good idea to use a primary residence as an investment vehicle or cash machine. But the problem with national housing policy goes beyond encouraging would-be homeowners to purchase property they cannot afford.

For decades, housing policy has rested on the premise that the quintessence of the American dream — home ownership — was good for the country. Urban planners, economists and local officials were confident in their belief that owners were better citizens. Home owners not only paid local property taxes but they also maintained their environs better, voted more regularly and participated more frequently in civic causes — or so the thinking went.

But that old model represented a bygone era, when the chance to buy a house in Levittown represented the opportunity to move away from crowded urban tenements. The World War II veterans who benefited from the GI bill, which gave them federally-guaranteed loans, helped start the era of widespread home ownership.

But a younger generation is less likely to marry as early, to stay in the same job or to want a patch of lawn with a barbecue grill. Many young professionals move into well-appointed apartment buildings or complexes that offer a hint of luxury without the weight of a mortgage. They are no less conscientious about their responsibilities for want of a house payment. And when a new opportunity beckons in another city, they can pull up stakes without the anchor of a house.

I haven’t fully recovered from the home-ownership ethic of my childhood; I’m a renter because of an unexpected job relocation. But I now know there is no reason to regard home ownership as the foundation of the American dream.

83 comments Add your comment

Rightwing Troll

June 18th, 2011
8:04 am

“So, therefore, your idea is to take away another tax break from those in the middle and upper class because you think the dream of home ownership is a bygone one.”

Why should a tax break be given for buying a home? Clinging to unsustainable entitlements?

Starring Kam Fong as Chin Ho

June 18th, 2011
8:35 am

@ Don’t Tread, and I have seen to my responsibilities for my retirement, so let us take away everyones Social Security. I don’t require housing assistance so stop section 8 housing. Nah, the libs will never go for it.

Jimmy62

June 18th, 2011
9:44 am

Paddy O: Seems you are still stuck in the past that Cynthia correctly declared dead. You skip over so much in your analysis, including the fact that a lot of responsible homeowners got extremely screwed in the last few years and would have been far better off both economically and emotionally had they just rented instead. I rarely agree with Cynthia, but she’s mostly right here, and you are apparently unable to adapt to a new economic environment.

Lil' Barry Bailout

June 18th, 2011
9:54 am

The reason you’re able to rent in the first place is because someone else is willing to own the property. They are taking the risk that you are not willing to. I’m sure that won’t stop you from ungraciously cursing your landlord for making you pay your rent when the Bimmer payment and the credit card bills start to add up.

jconservative

June 18th, 2011
10:07 am

Amen!

I own two. Live in one and have been trying to sell the other for 3 years. All potential buyers want the house for a token fee.

carlosgvv

June 18th, 2011
10:52 am

If you own a house you ae responsible for all the costs. If you rent, you must pay every month no matter what. For many of us, “can’t win for losing” is the reality of housing life.

Dr. Pangloss

June 18th, 2011
11:11 am

If you’re moving to another city, is it better to (a) sell or rent out the old home or (b) pay a penalty for breaking the lease on a rental?

Would you rather (a) pay taxes on your own home and then deduct them from your income tax or (b) pay your landlord’s real estate taxes and let him/her claim them as a business expense?

If you’re bearing down on retirement and a fixed income, would you rather (a) have a mortgage payment that never goes up much or (b) have a lease that increases in cost every time you renew it?

CT is jumping on a bandwagon here. People look at the current trend and think that it’s going on forever.

booger

June 18th, 2011
11:42 am

Owning a house is good if you can afford it. It’s bad if you can’t. Unfortunately our government has has taken a different approach. If all the home owners who lost their homes in the housing “bust” had paid 20% down, there would have been far fewer homes on the market, and far fewer foreclosures. It’s easy to walk away from a zero down mortgage.

Mr Charlie

June 18th, 2011
12:07 pm

Dr, you are wise. When is the exact perfect time to buy a home? When CT says it is not. If you buy when everyone thinks you need to sell, and sell when everyone agrees it is time to buy, you will make out quite well. But of course, whiners line CT and Kamshaft will call you greedy, and want to take your gains from you.

Lil' Barry Bailout

June 18th, 2011
12:17 pm

Looks to me like this is a great time to buy–prices and mortgage rates are down. From what I’ve read and heard, folks are so skittish about buying that the number of renters is up and that’s driving rents up (the ol’ supply and demand thing).

Lil' Barry Bailout

June 18th, 2011
12:18 pm

LOL Mr Charlie. Yes, if you bought low and sold high, then you STOLE from somebody!

Lil' Barry Bailout

June 18th, 2011
12:20 pm

Funny that CT seems real proud of herself for getting a “tidy profit” on the sale of her home. Apparently it’s OK for libs to buy low and sell high, but when an eeeeeevil corporation does that, well it is time for some punishment!

Lil' Barry Bailout

June 18th, 2011
12:30 pm

CT, how many people did you hire with that cash you’re sitting on?

Kamchak

June 18th, 2011
12:38 pm

But of course, whiners line CT and Kamshaft will call you greedy, and want to take your gains from you.

Apparently it’s OK for libs to buy low and sell high, but when an eeeeeevil corporation does that, well it is time for some punishment!

Not intended to be factual statements.

Mr Charlie

June 18th, 2011
12:48 pm

It is Classic liberalism at its finest. Lets start out that for 200 years, a home in American is about a stable investment you could make. But about 20 years ago a group decided that they should legislate that everyone should be given the opportunity to purchase a home, regardless of their ability to pay the mortgage. So that leads to where we are, and now CT is saying, ya know? maybe the homeowner thing is not a good thing, maybe we should eliminate the tax deduction and encourage renting. Everyone should rent.

But in classic liberal half brain thinking, there is no thought of who you are renting from. Somebody still has to own the real estate. So, now the smart money will purchase real estate and rent it out. So in 20 years, the majority of the liberals that heed CTs advice and be renting their homes from conservatives. It will go right back to where it was before all this started.

Ya think CT will be happy then? As I said, social engineering will lever eliminate the fact that some people are just smarter than others.

Kamchak

June 18th, 2011
12:53 pm

But about 20 years ago a group decided that they should legislate that everyone should be given the opportunity to purchase a home, regardless of their ability to pay the mortgage.

Not intended to be a factual statement.

Mr Charlie

June 18th, 2011
12:57 pm

And I know liberals want to blame banks for making sub prime mortgages, ARMS, and other tools that were bad policy. But again, if the school systems prioritized math, finance, and rational thought, instead of self esteem, social promotion, and sports, people would have understood the terms, and figured out what they needed to do to get better terms (save money for down payment, keep good credit), and the banks would not have been able to sell these loans.

Mr Charlie

June 18th, 2011
1:06 pm

After reading this article, I have not been this bullish on real estate in quite some time. Liberals need to rent. It is just flat out that simple. Once this cycles back to how it was before, the real estate market will be stable and strong. Leave the home ownership to those who understand what ARM, Sub Prime, risk, return and responsibility means. Leave it to people who can make sound financial decisions. Once you do that, the market will be like it has been the past 200 years. Only then, will the liberals want to legislate home ownership again.

Whoa

June 18th, 2011
1:27 pm

Mr C, love your logic. Love reading what you post. Not so much for Kam. When I see his name I skip to the next post.

Provost

June 18th, 2011
1:44 pm

Agree with CT that renting is the best option, for transients and lazy people.

Real estate is like any other asset, it’s better @ certain times than others to be an owner. Valuations will regress to the mean for a while in the aftermath of the housing bubble. But once things stabilize there will be another stampede back into R/E. Like the old cliche says, they’re not making any more of it.

Tired and Disgusted

June 18th, 2011
2:12 pm

Cynthia I agree with you I am 55 years of age and I don’t want to own another house at this point in my life. All I need is a small condo and renting won’t be a problem either. I am simplifying my life to just enjoy myself without a lot of extra nothing.

Mr Charlie

June 18th, 2011
2:33 pm

Home ownership depends on your goals. If you goal is to buy one with as little cash down in hopes of gaining instant equity and selling it in 2 years at a 30% profit, I would have to agree that home ownership is not for you.

If you bought a home with a goal of paying it off as soon as you possibly can? Nothing has changed for you. Actually with interest rates so low, this all has played into your hands.

Finally if you know nothing about buying maintaining or financing a home, and you bought one because some half baked pundit like CT said you should, and maybe even hinted that racism was the reason you don’t already own one, then,you should not ever own a home.

Mr Charlie

June 18th, 2011
2:36 pm

Finally, if you rent, remember, somebody owns that home. They have taken risk that you were not willing to take. If they get wealthy in the future and you don’t, don’t blame them.

Mr Charlie

June 18th, 2011
2:42 pm

I know what we should do, since renting from somebody means they will make profits, and will also mean that the landlord might get ill gotten wealth as if real estate appreciates, all land and home should be owned by the government. That way they could decide fairly who lives where.

Lil' Barry Bailout

June 18th, 2011
2:53 pm

Kamchak: Not intended to be interesting or insightful.

Kamchak

June 18th, 2011
3:12 pm

casual observer

June 18th, 2011
3:55 pm

Your preaching this CRAP now that everyones home is worthless. Because of this disaster we have running our country. The “FOOD STAMP” president isn’t done .. He hasn’t totally transformed America as he promised YET! The auto indunstry is now Goverment motors. Next thing you know CT will be telling us car ownership isn’t all it’s cracked up to be. What’s next? Listen people your Healthcare isn’t all that so the government is going to run it for you.

FOUR MORE YEARS! FOUR MORE YEARS! FOUR MORE YEARS! FOUR MORE YEARS!!

And we’ll look like Europe and Africa. PATHETIC!

Kamchak

June 18th, 2011
4:39 pm

…now that everyones[sic] home is worthless.

Not intended to be a factual statement.

Dr. Pangloss

June 18th, 2011
5:06 pm

Mr. Charlie, does every topic incite you to an outpouring of venom? How do you live with yourself?

Lil' Barry Bailout

June 18th, 2011
5:12 pm

Dr. P, why do you equate factual information that you find inconvenient with “venom”?

Mr Charlie

June 18th, 2011
7:21 pm

Dr, Think about all the work that the left has done to sell home ownership as a “right”, and now that the house of cards has collapsed, we have a liberal leader saying, well, gee, maybe it is overrated. Time exposes the lack of logic in liberal thinking. How do you breath with your head in the sand?

Just say'n

June 18th, 2011
7:36 pm

Now that a tax deduction won’t benefit all those who fell for “the American Dream” song and dance performed by the Democrats and who lost their homes as a result of the housing debacle, CT is ready for the deduction to be done away with. That figures! She’ll probably want a deduction for renters!!!

Kamchak

June 18th, 2011
7:39 pm

Dr, Think about all the work that the left has done to sell home ownership as a “right”, and now that the house of cards has collapsed…

But my attitude is, if somebody can’t find work and they want to work, we’ve got to continue to work on expanding the job base. And part of economic security is owning your own home. (Applause.) Part of being a secure America is to encourage homeownership. So somebody can say, this is my home, welcome to my home.

Now, we’ve got a problem here in America that we have to address. Too many American families, too many minorities do not own a home. There is a home ownership gap in America. The difference between Anglo America and African American and Hispanic home ownership is too big. (Applause.) And we’ve got to focus the attention on this nation to address this.

And it starts with setting a goal. And so by the year 2010, we must increase minority home owners by at least 5.5 million. In order to close the homeownership gap, we’ve got to set a big goal for America, and focus our attention and resources on that goal. (Applause.)

[...]

My point is, Mel understands what it means to dream, and then to work to realize the dreams. I’ve also picked a fine friend of mine from Texas, named Alphonso Jackson, to serve as the Deputy of HUD. And where are you, Alphonso? There he is; I appreciate you. (Applause.) These are can-do people. So when we set a goal, they understand their job is to work toward that goal.

[...]

And so here are some of the ways to address the issue. First, the single greatest barrier to first time homeownership is a high downpayment. It is really hard for many, many, low income families to make the high downpayment. And so that’s why I propose and urge Congress to fully fund the American Dream Downpayment Fund. This will use money, taxpayers’ money to help a qualified, low income buyer make a downpayment. And that’s important.

[...]

And let me talk about some of the progress which we have made to date, as an example for others to follow. First of all, government sponsored corporations that help create our mortgage system — I introduced two of the leaders here today — they call those people Fannie May and Freddie Mac, as well as the federal home loan banks, will increase their commitment to minority markets by more than $440 billion. (Applause.) I want to thank Leland and Franklin for that commitment. It’s a commitment that conforms to their charters, as well, and also conforms to their hearts.

This means they will purchase more loans made by banks after Americans, Hispanics and other minorities, which will encourage homeownership. Freddie Mac will launch 25 initiatives to eliminate homeownership barriers. Under one of these, consumers with poor credit will be able to get a mortgage with an interest rate that automatically goes down after a period of consistent payments. (Applause.)

Fannie Mae will establish 100 partnerships with faith-based organizations that will provide home buyer education and help increase homeownership for their congregations. I love the partnership. (Applause.)

From the president’s June 2002 speech in Atlanta.

What’s that you ask?

Who was president in June 2002?

George W. Bush, that’s who.

“[A]ll the work that the left has done to sell home ownership as a ‘right’…”?

Too funny.