Homeownership no longer the American dream?

Though housing prices have dropped to new lows, folks aren't sure a home is a solid investment anymore.

By DGK Apr 20, 2011 6:40AM

Image: House with coins (© Digital Vision/Getty Images)This post was written by Kim Peterson for MSN Money.

 

Houses are dirt cheap right now. In fact, homes are more affordable than at any time since the National Association of Realtors began measuring the data back in 1970, Bloomberg reports.

But people aren't buying. The economy and the tightened lending market have all but removed the possibility of homeownership for some. But there's another interesting sentiment developing: More and more people just don't want to buy anymore.

The percentage of people who think of a home as a safe investment has dropped to just 64%, Bloomberg reports. That's the lowest ever reported in the national housing survey from Fannie Mae, and down from 83% in 2003.

So many people have turned away from homebuying, in fact, that we may be seeing a culture shift. Maybe the house with a white picket fence is no longer part of the American dream.

Well-known investor James Altucher lists several reasons owning a home is a bad idea in a recent blog post. Housing prices historically haven't risen enough to merit that huge down payment, he said. Homeowners also must deal with closing costs, pricey maintenance, property taxes and the fact that most of their life savings is tied up in one investment.

"I'm never going to buy a home again," Altucher writes. "And sit there in the middle of the night thinking, 'Why the hell did I do this to myself again?'"

Other renters feel the same way. "The magnitude of the housing crash caused permanent changes in the way some people view homeownership," one finance professor told Bloomberg. "Even as the economy improves, there are some who will never buy a home, because their confidence in real estate is gone."

You can almost see this conflict playing out in the stock price of homebuilders such as Toll Brothers (TOL). Check out the one-year price chart to the left. Investors don't know what to think of this sector. The three-year chart is even more telling.

Economists tell Bloomberg that the economic crisis destroyed the notion of a house as a risk-free investment. It was just a standard assumption that whatever house you bought would increase in value. No one expected to be underwater on their mortgage or in foreclosure.

But at the end of last year, a shockingly high 11 million homes in the U.S. were worth less than what owners owed on their mortgages, Bloomberg reports.

And in March, the percentage of Americans who plan to buy a home in the next six months fell by 23%. Certainly that share will recover as the economy improves. But it will be very interesting to see the long-term chart of this sentiment. Are we becoming a nation of renters?

VIDEO ON MSN MONEY

11Comments
Apr 20, 2011 8:57AM
avatar
you should do what makes economic sense, even in rentting the landlord must deal wi the the same expenditures of a homwoner and those costs will be shifted to the tenant, and soon that tenant will again think about buying a home, then history repeats itself.
Apr 20, 2011 10:08AM
avatar
it's equity, if you buy smart and within what you can aford.  add 30 years and you stop making payments and no more "rent".  i shudder to imagine what my retirement would be like if i had simply rented and gone on vacations my whole life only to continue paying rent somewhere until i die.  5 more years and my house is MINE! 
Apr 20, 2011 11:09AM
avatar

The percentage of people who think of a home as a safe investment has dropped to just 64%, Bloomberg reports. That's the lowest ever reported in the national housing survey from Fannie Mae, and down from 83% in 2003.

It is about time. This con has run long enough. The propaganda affect has finally run its course loosing a lot of its power to deceive. I for one am glade that perceptions have changed. An owner occupied home is and has always bin a depreciating asset. A liability on the balance sheet. A running wheel for gerbils that goes nowhere fast.

 

Without banking price supports always ratcheting prices higher moving retirement farther and farther out of reach with each click, the reality sinks in quite quickly; there has to be a better way!! We have the opportunity of a life time to do something good for our grand children. Get the banks out of the mortgage business. At the very least hobble them.

 

Restore the free market and let prices in the housing market float at the cash equilibrium price. Make home ownership; real home ownership. This single act will do more to help people escape the slavery that is renting from a Lord. Renting from a bank may be a tad cheaper, but putting everyone on tread mills just doesn’t cut mustard in a free society.

 

This blessing that the banking industry considers a crisis has been a real eye opener to many. It has been a chance to see what a house is really worth without banking price supports. Just imagine all the money you could save for things like retirement without a house payment all those years. 

 

Sure houses would depreciate due to functional obsolesce and could no longer be useful as piggy banks. On the bright side people that can afford new houses would have the latest floor plans and amenities. People that cannot afford to buy new can buy the older homes at an affordable depreciating price making affordable housing available once again to the masses.

 

The hell with sub prime lending at obscene price supported levels. The hell with 30 year tread mills to nowhere for over priced homes. The hell with “investments” that cost more then you will ever recoup and the propaganda necessary to cover that fact up. The hell with indentured slavery all together. Freedom is a choice. Once price supports are reinstated, I doubt you will get another chance at freedom in your life time or your grand children’s lifetime for that matter.

 

God Bless.      

Apr 20, 2011 11:04AM
avatar
For the record my friend pays as much in property tax as my entire rent.  My insurance costs as much as one dinner at Mc Donalds.  Oh yeah, let's see, you probably end up paying thousands of thousands of $$ in interest - this price wasn't passed down to me in my rent because my landlord are tycoons.  That Have fun mowing your grass while I'm out riding my bicycle into the sunset suckers.  On average you will spend as much in upkeep as the initial price of your home.  Hmmmm,,, 50% loss,,,,,Sounds like a great investment,,,, for people who don't understand investments.
Apr 20, 2011 9:47AM
avatar
If you think you can get out of the costs for upkeep and taxes by renting, you have your head stuck in the sand.  Renters pay these costs just like consumers pay corporate taxes.  They are costs of doing business.  This maybe a really good time to buy a house.  If you want to make money in the long run, go against the herd.
Apr 20, 2011 9:12AM
avatar
The only people who think it's an "investment" are not investors.  For those who realize this, think about the flood of used houses about to hit the market as baby boomers retire.  We may not even be at a bottom.  Besides, I don't want to spend all my time trimming the bushes, mowing, painting etc.  I don't want to be tied to one area.  Even if I did, middle class people like me can't afford a home anymore.  How am I supposed to buy one with 80K$ in student load debt and working at McD's with Ketchup in my veins, but air in my wallet.
Apr 20, 2011 8:57AM
avatar
A home will eat you alive if you think it is a money making deal.Upkeep and taxes on homes we owned over the past 35 years was stagering.It is a place to eat, sleep,shower and stay warm.If we had put the upkeep and taxes in the bank for that long and paid rent i would have had more time for my family,I would still have my harley that I sold to buy a furnace and compound interest would have made us rich.Some times you should not listen to your parents because all they told us was work hard,buy a home and it will all work out .WHAT A LINE OF CRAP!!!!!!
Apr 20, 2011 12:55PM
avatar

From reading these posts, it should be obvious that the saying "there are two sides to every story" is certainly true.....bottom line, home ownership is right for some people, but not for others, accept that as well as the decisions of those who do or don't own a home.  My wife and I bought a home after our marriage, made extra principal payments each month, deducted mortgage interest and RE taxes (as well as other things because we were above the standard deduction already), and paid off the home early (we also didn't buy more than we needed). We both came out of apartment environments, and having had to deal with obnoxious neighbors, appreciated the privacy of the home environment.  But that's us, not everyone, and I respect that.   P.S., we now have a lot of equity to use when (if?) we retire and want to build a home out in the country, on a lake, and go fishing whenever we want, but again, that's just us. 

Apr 20, 2011 12:02PM
avatar

Home ownership will always be the primary American dream. Nothing will ever change that.  And, renting is much more likely to give you neighbors who are a big problem to you with loud, rowdy and/or uncaring behavior, and who are also far less concerned with property upkeep than are owner-occupants. That is the real truth no matter any opposing arguments in favor of renting.

 

Apr 20, 2011 11:03AM
avatar
(Five more years and the house is mine) go life estate before you end up in a nursing home it will not be yours for long. We went against the herd and was a landlord for 23 years.Do you know tenants have more rights in some states and  some times it takes for ever to get them out.Does anybody know what the HAMBURG SURPRISE is? Been there done that ! All you future home owners and land lords look before you leap before you find out what the cost of doing business turns out to be.I am not a smart **** only giving you a heads up. 
Apr 20, 2011 11:11AM
avatar
But Fannie Mae told me it's a great way to become a millionaire - just buy a house, keep fixing it, paying taxes, interest and wait!!! 
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.