As has been trumpeted in the media of late (see front page of yesterday's USA Today), the percentage of U.S. families owning their own home is down from a high of about 70% two years ago to about 67% today. Economists expect the rate of ownership to keep falling. Is that cause for concern?
I don't think it is. In fact, I think the whole idea of home ownership has been oversold by the government, the media and the real estate industry.
From the government's point of view, the premise is that home ownership mean stability. That a homeowner will contribute more to his or her neighborhood and community than would a renter. This is the justification for the government's subsidization of home ownership through the mortgage interest and real estate tax deductions.
From the media's point of view, it loves easy ink and since all the financial wizards of the last decade or two have been advising people that the best investment one can ever make is to own a home, that is what the media accepts as gospel.
From the real estate industry's point of view, home ownership is the golden calf. Real estate brokers, lenders, mortgage brokers, title insurers, attorneys and escrow companies all live off the back of those buying homes.
Unfortunately, in the last decade millions of people bought into the inducements of the government, the media and the real estate industry - and bought a home. Many today wish they had not.
Home ownership is not for everyone and, in fact, can be a real albatross for our society as a whole. Just witness what happened from the push to raise the home ownership levels. There is a good argument that this push was the root of our current economic woes given that our lending system went nuts putting increasing numbers of people into homes.
Home ownership ties up capital. If instead of buying a home, people invested capital in themselves or in their businesses, that capital will probably return a much higher yield than it will stuck in a house. Home ownership also restricts mobility. Some people who might otherwise relocate to areas where jobs are available may have no options if locked into a house. Home ownership is insulating. Home ownership may mean stability but it also may mean routine. Being tied to a mortgage payment restricts lifestyle changes.
And perhaps most importantly, the idea that a home is a great investment is faulty at best. The argument that rent is a waste since homeowners are paying down a mortgage is silly. Just look at the principal balance on a traditional mortgage after five years. It will barely have moved. And, of course, the argument that housing prices will always increase is now proven to be a big fact ruse.
Homeownership has been oversold to the point where renters may feel like second-class citizens. Or, stupid not to buy. Well today many renters are having the last laugh.
Jim Randel is the author of "The Skinny on the Housing Crisis" which was just awarded First Prize in a book competition sponsored by NAREE, an organization of 650 journalists who cover housing, business and finance.