Homeownership and the American Dream

Abstract

For decades, it was taken as a given that an increased homeownership rate was a desirable goal. But after the financial crises and Great Recession, in which roughly eight million homes were foreclosed on and about $7 trillion in home equity was erased, economists and policymakers are re-evaluating the role of homeownership in the American Dream. Many question whether the American Dream should really include homeownership or instead focus more on other aspects of upward mobility, and most acknowledge that homeownership is not for everyone. We take a detailed look at US homeownership from three different perspectives: 1) an international perspective, comparing US homeownership rates with those of other nations; 2) a demographic perspective, examining the correlation between changes in the US homeownership rate between 1985 and 2015 and factors like age, race/ethnicity, education, family status, and income; 3) and, a financial benefits perspective, using national data since 2002 to calculate the internal rate of return to homeownership compared to alternative investments. Our overall conclusion: homeownership is a valuable institution. While two decades of policies in the 1990s and early 2000s may have put too much faith in the benefits of homeownership, the pendulum seems to have swung too far the other way, and many now may have too little faith in homeownership as part of the American Dream.

The effect of culture on home‐ownership

“…The estimates for the education level controls are also consistent with the existing empirical results, since higher levels of education are related to greater probabilities of home-ownership (Coulson, 1999;Constant et al, 2009;Goodman and Mayer, 2018). Being single or never married decreases the probability of owning one's own dwelling.…”

“…This is calculated using the IPUMS International. The average of homeowners is 70 percent, which is quite similar to that presented in Goodman and Mayer (2018) for the year 2015 (at 69.6 percent). As mentioned above, although many factors can determine those home-ownership dissimilarities, it is possible to argue that housing tenure outcomes cannot only be explained within a standard framework that accounts only for socio-economic, demographic, and housing market characteristics.…”

“…Being male and having children under the age of sixteen increases the probability of home-ownership (Constant et al, 2009). As Goodman and Mayer (2018) show, the older the individuals, the more likely they are to be homeowners. The impact of age has an inverted U-shape, achieving the maximum at 83 years old.…”

Black Homebuying after the Crisis: Appreciation Patterns in Fifteen Large Metropolitan Areas

“…Goodman and Mayer () suggest that the evidence used to argue against minority homeownership is inconclusive and that with appropriate mortgage regulation in place, more households should be able to benefit from homeownership. Along these lines, Grinstein‐Weiss et al.…”

“…In a recovering market, it might be expected that owner estimates lag true market values (Bucholz et al 2016). Goodman and Mayer (2018) suggest that the evidence used to argue against minority homeownership is inconclusive and that with appropriate mortgage regulation in place, more households should be able to benefit from homeownership. Along these lines, Grinstein-Weiss et al (2013) found that even during the calamitous period of 2005 to 2008, low-and medium-income homeowners receiving prime loans accumulated more assets than did otherwise similar renters.…”