Tags: Humphries | homeownership | equality | home

Zillow's Humphries: Homeownership Isn't All It's Cracked Up to Be

By    |   Wednesday, 29 April 2015 06:40 AM

Homeownership has always stood at the center of the American dream, representing a tangible symbol of our entrance into the vaunted middle class.

"There's a lot of wisdom in this emphasis on homeownership," Stan Humphries, chief economist of housing information service Zillow, writes in an article for USA Today.

"Especially in this era of increasing inequality, homeownership can act as the great equalizer. For many families, a home, or profit from the sale of a home, represents the largest source of wealth passed from generation to generation."

But there's another side to this, Humphries notes.

"The limits of this wisdom were tested during the last housing boom, when the homeownership rate was pushed to almost 70 percent before plummeting as we worked through the bust," he says.

"The homeownership rate is falling largely because of an inconvenient, truth: while they might feel good, policies aimed at decreasing inequality by increasing homeownership often achieve the opposite."

We might not want to face the unpleasant fact that "buying a home is a gamble that we will want and be able to continue living in one place for many years," Humphries explains.

"But lower-income Americans sometimes can't afford that gamble. When circumstances throw these homeowners a curveball — a sick child or loss of a job — they often don't have the flexibility to both deal with the crisis and keep up with the mortgage. The results can be even more disastrous when rapid home value declines cause borrowers to slide into negative equity."

Bottom line: "homeownership is not for everyone," Humphries states. "And our steadfast belief that homeownership is always the better option has led us to worry less about the one-third of Americans that rent, leading to a crisis in affordable rental housing."

So what's the solution?

"We could focus on the creation and maintenance of more affordable rental housing. We could find innovative new ways to build wealth, aside from homeownership," Humphries writes. "Given the prevalence of single-family rentals in the aftermath of the recession, we could explore the feasibility of renting-to-own on a wider scale."

Many Americans apparently agree with Humphries. A new Gallup poll shows that 41 percent of us who don't currently own a home don't plan to buy one in "the foreseeable future," up from 31 percent two years ago.

"For an economy that could benefit from a housing recovery for sustained growth this decade, this news may not be the most welcome," writes Gallup's Art Swift.

Just 61 percent of the 1,015 adults surveyed say they own their home, the lowest Gallup has measured in its 15-year trend.

"It has been a closely held belief for many in the U.S. that owning a home is a key to eventual personal prosperity," Swift points out.

"But the Great Recession of 2007-2009 may have changed Americans' ability to act on that belief, given that the housing market has yet to return to pre-recession levels of ownership or home values."

Looking forward, "it is possible that homeownership will return to previous levels in the years ahead if the economy continues to improve," Swift says. But, "it is also possible that a 'new normal' is occurring in this country, wherein Americans won't be buying a house for the foreseeable future."

He notes an interesting trend with younger Americans that you may already have seen up close and personal.

"For a younger generation that is struggling with student debt, renting a home may be an increasingly safe option," Swift explains.

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Homeownership has always stood at the center of the American dream, representing a tangible symbol of our entrance into the vaunted middle class.
Humphries, homeownership, equality, home
Wednesday, 29 April 2015 06:40 AM
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