Deseret News (CFED)
July 6, 2011
One of the most remarkable things about the recent housing crisis in the U.S. is Americans' extraordinary and enduring faith in the importance of homeownership. Roughly 9 in 10 people continue to say homeownership is an important part of the American Dream, according to a recent New York Times/CBS News poll.
That isn't to say they think it's a good investment. The poll also finds that nearly half of Americans think buying a home is risky, and 74 percent think something else is a better investment. Time magazine explains this with the astute observation that perhaps the American Dream isn't about profit or investment, but "maximum control over your own lifestyle, tax-advantaged. It's about the prospect of one day owning where you live, free-and-clear."
There is evidence, however, that overzealous efforts to increase homeownership contributed to the housing bust as purchasers and policymakers confused home financing with ownership. Presidents Bill Clinton and George W. Bush both supported policies designed to make buying a home easier, especially for middle- and low-income families -- policies that unfortunately had the unintended consequences of encouraging reckless lending and, many argue, precipitating the housing crisis.
All this has forced Americans to ask whether homeownership is for everyone, and the answer seems to be that maybe it isn't. The very young, the very old, the very mobile or the very poor may not be good candidates.
But it would be a mistake to assume that homeownership is simply for the rich and not for the poor. Rather, the dream of homeownership should be for the responsible -- and not the irresponsible -- at all reasonable income levels.
A 2010 study by the Corporation for Enterprise Development and the Urban Institute examined a class of low-income homebuyers who largely escaped the foreclosure crisis. These buyers purchased homes through programs that required them to complete financial literacy courses, meet with counselors who advised against risky loans and save toward a sizable down-payment -- often with federal or private matching dollars. The programs also required them to have their mortgage loans reviewed and approved.
It's no surprise that most of these low-income buyers were able to hold on to their homes even through the housing downturn. They had been coached to buy homes with an eye toward financial security and freedom, rather than tempted to take on more debt than they could afford for homes larger than they needed.
Lenders and buyers alike need to refocus on the "own" in "home-ownership." Tremendous debt that can't be paid off within a reasonable time frame is not the same thing as ownership -- it's being owned by a house rather than owning it. It's the opposite of the American Dream.
Homeownership may not be for everyone. But it can be for those who want it and are willing to save, to plan and to make a smart commitment to a reasonable home within their means.