The Official Online Weekly Newspaper of NAHB
Joining a sizable backlash against recent articles in Time magazine and elsewhere disparaging homeownership and attacking long-standing government policies to help families become home owners, major national news media have been publishing articles arguing in housing’s favor and disputing its critics.
“Since the bursting of the housing bubble, there has been a steady drumbeat from the factories of futurist punditry that the notion of owning a home will, and, more importantly, should become out of reach for most Americans,” Joel Kotkin writes in the Sept. 14 issue of Forbes magazine.
However, he points out in his article, “Why Housing Will Come Back,” home owners and those aspiring to become home owners “now represent the core of our economy without which a strong recovery is likely impossible. Houses remain as a financial bulwark for a large percentage of families, the anchor of communities, and, increasingly, home-based businesses.”
Those who are sniping at homeownership and arguing that support for it should be abandoned, Kotkin notes, include conservatives who believe the role of government in housing has grown too big; some who suggest households would be financially better off by plowing their money into the stock market or even spending it on consumer purchases; neo-urbanist intellectuals who see aging baby boomers heading off for retiree communities and nursing homes; and futurists who envision an era in which Americans won’t have a need to own a permanent place because they will be too busy chasing available jobs from one part of the country to the next.
Some of the greatest hostility towards homeownership, he says, comes from the progressive left. A case in point is Time’s “The Case Against Homeownership,” which “encapsulates the current establishment’s conventional wisdom: that homeownership is by nature exclusionist, ‘sprawl’ promoting and responsible for ‘America’s overuse of energy and oil.’” (For a story in the Sept. 6 NBN on NAHB’s response to the Time story, click here; for a response from an NAHB member in the Housing Forum in this issue of NBN, click here.)
Despite the voices that have been raised against it, Kotkin concludes that homeownership, both in the single-family and multifamily markets, “is not likely to fade dramatically for the foreseeable future. The most compelling reason has to do with continued public preference for single-family homes, suburbs and the notion of owning a ‘piece’ of the American dream. This is why four out of every five homes built in America over the past few decades, notes urban historian Witold Rybczynski, have less to do with government policy than ‘with buyers’ preferences, that is, What People Want.’”
As part of the return to normalcy in the nation’s housing markets, Kotkin says that the historic balance between incomes and prices needs to be restored to where it takes two to three years of median household income to purchase a median-priced home, down from a ratio of 4.6 at the peak of the boom. That process is nearing completion in a large part of the country.
“Of course without a return to robust job growth, particularly in the private sector, the home market — and pretty much all mainstream consumer purchases — will remain weak,” writes Kotkin. “No matter how low prices get, people worried about losing employment do not constitute a promising new market for homes.”
Among factors he cites working to housing’s long-term advantage: the U.S. population is projected to expand by 100 million by 2050; 60 million strong, the children of the baby boom are in their 20s and poised to start buying houses; in their pursuit of the American dream, immigrants are heading to the suburbs as fast as they can get there; multigenerational households are on the rise back to 1950s levels; and single-family houses are increasingly able to provide space for part- and full-time offices.
“Barring a long-term permanent recession or a national planning regime aimed at curbing single-family homes construction, these factors should lead to a new surge in home buying starting later this decade,” writes Kotkin.
“It may be too late to save many who overextended themselves in the bubble, but this resurgence could do much to propel our anemic economy, restoring the home to its rightful place as one of the cornerstones not only of the American dream, but of our democracy,” he says.
Painting the Room Purple
Responding specifically to the Time article by Barbara Kiviat, in the Sept. 21 Realty Times Bob Hunt, from the National Association of Realtors®, takes the author to task for blaming homeownership for “foreclosures and walkaways, neighborhoods plagued by abandoned properties and plummeting home values, a nation in which families have $6 trillion less in housing wealth than they did just three years ago.”
“But she is mistaken,” writes Hunt. “All those regrettable events were not caused by homeownership; they were caused by reckless lending programs.”
Hunt also responds to critics who say that the government cannot afford to continue to promote homeowership: $80 billion in lost revenue in 2009 for the mortgage interest deduction, according to Kiviat; and $120 billion that year for deductions for mortgage interest and property taxes, and preferential treatment of capital gains on homes, according to Washington Post economics columnist Robert Samuelson.
“Of course these figures may amount to chump change in the context of the multi-trillion dollar estimates regarding the cost of bailouts and the ‘stimulus,’” Hunt says. “Moreover, the ‘lost revenues’ attributed to tax-advantaged housing may well be offset by the variety of positive social outcomes (e.g. lower crime rates) that have been attributed to neighborhoods with high ownership rates.”
As to what to make of the housing detractors who have been cropping up in the press lately, Hunt says, “Well, I don’t think homeownership is about to be banned. But you can sure expect to see some chipping away at its tax advantages as the government tries to figure out how it’s going to get out of the financial hole that has been dug. There will be a lot of economic arguments.”
As for putting a value on homeownership: “The best answer may be contained in an anecdote that appears in the Time article. Kiviat writes, ‘Star Korajkic, one of America’s newest home owners, doesn’t particularly care about all this financial history. What she cares about is being able to paint her daughter’s room purple without asking anyone’s permission.’ And what is the value of that? Priceless.”