The dream of owning your own home is as American as apple pie–and (supposedly) better for you. Over and over, we are told that homeownership will make you happier, healthier and wealthier. Heck, it’s even supposed to make you a better citizen.
Of course, there are times when, depending on your age, your savings and your income, buying a home can be a smart decision and an excellent way to build wealth. But is buying a home really such a universally good idea?
It’s hard to separate fact from propaganda.
Certainly, the virtues of ownership have been preached loudly and from on high. As early as the 1920s, Herbert Hoover extolled home ownership as a pillar of family life. Nearly 80 years later, President Bush reiterated the message, stating “there’s no greater American value than owning something, owning your own home and having the opportunity to do so.”
Homeownership has been touted as civic responsibility, “moral muscle” and a bulwark against communism. A 1922 pamphlet from the National Association of Real Estate Boards even promised that it would put the “MAN back in MANHOOD.” Over the years, it has been claimed that homeowners vote more, join more voluntary associations, take better care of their residences and have better-educated kids.
But to realize that America’s mania for home-buying is out of all proportion to sober reality, one needs to look no further than the current subprime lending mess. In the last decade, riskier lending practices combined with historically low interest rates and federal subsidies have encouraged a wave of low- and moderate-income households to buy homes.
Those borrowers are much worse off than before they bought. “There’s the loss of the initial investment, ruined credit ratings and the psychological trauma associated with foreclosure and being evicted,” says William Rohe, co-editor of Chasing the American Dream and a professor of urban studies at the University of North Carolina at Chapel Hill.
Worse, foreclosures are often concentrated geographically, meaning that neighborhoods that were already badly off now have even more abandoned properties. Conversely, ownership can trap a family in a declining neighborhood, while renters move on more easily.
“Some research has suggested that it isn’t whether parents own or rent, but the mobility of the household,” says Rachel Drew, a research analyst at Harvard University’s Joint Center for Housing Studies. In other words, it’s likely that families who stay in one place for a long time (renting or buying) are doing better by their kids than families that move often.
“All of these things we say are benefits of homeownership in the U.S. I think would also be benefits of long-term rental tenancy,” says Bourassa.
So if something in your gut–or on your bank statement–tells you that now is not the right time to buy, resist the pressure. There may be no place like home, but there’s no reason you can’t rent it.