Will the American Dream still include homeownership?
Even after the crash that resulted in millions of foreclosed homes and trillions of dollars of home equity lost, many Americans have not given up the idea that ownership is their economic dream.
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Most Americans want to own their own home. Some even call it a biological urge, based on our human desire to nest. Whatever the current economic condition of the country, whatever the latest programs offered or atrocities committed by government and banking institutions, that desire doesn't seem to change and is unlikely to change even 25 years from now.
Perhaps Thomas Jefferson put it best, "A right to property is founded in our natural wants."
Even after a devastating housing and mortgage crash that resulted in millions of foreclosed homes and trillions of dollars of home equity lost, the majority of Americans have not given up the idea that ownership is representative of their economic dream. (Bing: First-time homebuyer checklist)
"Americans continue to want to be homeowners and they want to do it in a more careful and responsible way given the crisis that we've been through, but there is no evidence that we're going to abandon the home ownership society," Housing and Urban Development Secretary Shaun Donovan said in an interview.
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Seventy percent of respondents to a monthly Fannie Mae survey in January said they would buy if they were going to move, an all-time survey high.
"The aspiration to own a home is unchanged," said Doug Duncan, Fannie Mae's chief economist. "Changing the rules of funding makes it harder or easier, and that's a little bit of what's going on today, but the aspiration is unchanged. That has been consistent across the crisis."
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Prior to the housing boom, presidents from Ronald Reagan to Bill Clinton touted the "homeownership society." They have been accused of pushing mortgage giants Fannie Mae and Freddie Mac as well as the Federal Housing Administration, the government mortgage insurer, to loosen their underwriting standards. The result of that push, critics say, was the over-leveraging of the American public.
Today, underwriting is tighter than during the housing boom. Some claim the pendulum has swung too far the other way, keeping potential buyers out of homeownership. The mantra has in fact changed politically.
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"A home is supposed to be our ultimate evidence that in America, hard work pays off, and responsibility is rewarded," President Barack Obama said in an August speech in Phoenix. He stopped short, however, of calling for a homeownership society, and in fact warned against a return to the past. "In the runup to the crisis, banks and the government too often made everyone feel like they had to own a home, even if they weren't ready. That's a mistake we shouldn't repeat."
Homeownership rose to a high of just over 69 percent during the housing boom after averaging around 65 percent for much of the previous decade, according to the U.S. Census. It has been falling steadily since, now down to 65.2 percent.
As housing recovers and we look to the future of homeownership, the biggest question for the next 25 years is not do we want to own a home, but how in fact will we own a home?
"The most interesting question right now is will we build a housing-finance system that supports that home ownership society or not?" Donovan said.
There is now one leading bill in Congress that would dismantle mortgage giants Fannie Mae and Freddie Mac, which have been under government conservatorship since September 2008. It would leave a limited government backstop, much like the Federal Deposit Insurance Corp., but put the mortgage business largely into the hands of private investors, which is where it was during the housing boom.
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Private investors have been extremely leery of dipping back into the mortgage business, and have only done so in limited, highly rated offerings.
Remarks in March by Michael Stegman, counselor to the Treasury secretary for housing-finance policy, to a banking conference put the current situation in perspective:
Losses sustained on investments are still fresh in everyone's mind. The new market today for mortgage-backed securities is unnecessarily thin and unscalable because rather than rebuilding from the ground up, putting in place a solid, sustainable foundation for future growth, the bond issuers continue to structure their offerings using varied terms, requirements and documentation that have failed to instill investor confidence.
The housing-finance system envisioned by the administration would require that the secondary market help provide liquidity to all segments of the primary market. Separately, it must also support affordable housing through its basic design, augmented by an explicit and transparent affordable-housing-funding mechanism.
Twenty-five years from now one would hope and expect that a new mortgage system would be in place. Some argue, however, that the housing crisis, combined with changes in social behavior, have altered for good the expectation and desire for home ownership. A new single-family rental market, 15 million homes strong, grew out of the crisis, and it is backed by large scale, institutional investors who claim they are in this new asset class permanently.
"As institutional ownership with its substantial equity capital and professional management provides increasingly attractive rental options in suburban America, we believe the demand for rental housing will grow — not as a transitional, substandard or second-class alternative to homeownership — but as a preferred option to the financial and often inflexible demands of homeownership," said Laurie Hawkes, president and chief operating officer of American Residential Properties, a single-family rental REIT based in Phoenix.
Donovan disagreed that rentership would remain as high as it is today.
"There have been some institutional improvements in management and other things, but in terms of fundamental demand, I would be surprised if it really becomes, in the scope of our larger housing market, a major change 10, 15, 25 years from now."
We need to drop all this nonsense that the American dream is only about something material.
Everything is disposable and people think "temporary". Renting gives a person more flexibility.
American Farce. I've never been able to earn enough $ to even qualify for a home loan. now at 57, I'm still paying $900 for an un insulated 560 sq.ft.apt. Trapped her for 5 years now and 7 in the dump before this. It's a negative wake up call when you realize there is no better way. There is no comfort zone, no light at any point. .....and the choke hold just gets tighter.
You all should see the crazy stuff renters have to agree to in "the Lease" One place, around the block from here, mandates that if a Renter dies the Management has the total ownership of all on site possessions and can ban Next of Kin from property, as they are not the Lease Holder. The paper work says Agents of management have the right to enter, 24/7, with out interference from Renter even to the point of self defense from assault. of course Renters were not allowed personal fire arms on the property, contrary to State and Federal Constitutional Rights.
Where I live. had a policy that any apartment door entry lock be approved by Management, prior to install. Then the only ones approved were the cheapest $10 special rom the corner store. That even I could open with a bread bag tie. I had a insurance claim because of in apartment vandalism, with out forced entry. Gang tats all over the building and grounds, even on the office front door. I talked with the Fire Marshal, and as I suspected his (and mandated rental standard) meaning of a "standard locking mechanism" was anything available to the Consumer. Where the Management understood that to mean cheapest on the market and making us Renters victims of burglary and vandalism because we can't lock our homes securely. Then with all the gang tats all over I can easily make the organized crime connection because employees have come to me saying " they could sell me electronics, game machines and computers they had in a stash house, left over from evections". Put it, step by step in writing and gave a copy to Landlord (916 units here, 5K units on this street) and a copy to the cops, who said they will file it. Circular file, no doubt. Landlord had a big staff turn over, suddenly.
2 years ago I successfully sued them for "betrayal of Fiduciary Obligation". An accounting error went uncorrected for (Mgr. even put it in writing there was NO accounting error) 10 months just to appear in time to prevent me from moving at the end of my lease. ....so still trapped.
I went to a mortgage for $650 taxes and insurance included with a 30 years fixed loan I just wish that all of us would have been lucky as I was, I live in the san francisco bay area and is incredible how rent is going higher and higher, landlords are taking advantage of high price houses and they raised rent, around the cities of the bay the only city that has a good rent control is berkeley but even there 2 bed for rent goes for $1600 to 2k the dream of ownership in the bay area is very hard to achieve and is creating the pre-bubble efect, people going to live to the suburbs getting away from the main hub to find affordable house prices I have lived in the bay area 20 years plus and the history is repeating itself another effect that did not happened in the bubble is that even people that rent is going to live 50 plus miles so they can afford to rent ,the commute is a killing !
for both renters and people that went that far just to own a house, gas price is terrible here in california! I would dare to say that the great bay area is one of the hardest places to own a house due to price and property taxes.
just my 2 cents.
I bought my first house making $5.50 an hour and yes it took sacrifices, We scrimped and saved also. Paid the modest home off in 15 years. Saved and sold bought my next house making 30K year and paid off in 8 years. Sold that home making 55k year bought next home with cash. just retired early due to an accident and on SSI. Current home is $500,000. Have two rental homes and a condo that I re nt. I've never been rich but I don't drive fancy cars, pay big smart phone bills, don't have cable tv. If I can do it with a wonderful stay at home wife anyone can do it. By the way. I lost my job twice.
Will power and home ownership is GREAT!