Home ownership has always been the great promise of American society. For generations we've believed and been taught that home ownership is is an axiomatic good. As a recent article in Time pointed out, our politicians have pressed that objective for generations. Herbert Hoover argued that homeownership could "change the very physical, mental and moral fiber of one's own children." Franklin Roosevelt, facing a world war, taught that homeowners were unconquerable." George H.W. Bush's Secretary of Housing, Jack Kemp, believed that home ownership would "save babies, save children, save families and save America." Home ownership is the way to transform a nation.
Realizing that my youngest daughter might not be able to buy a home in expensive L.A., I confess to a bit of nostalgia. My knee-jerk response was that she'd remain a second-class citizen in spite of her many resources. I come from a long history of property owners. My parents stressed its value. And my forbears for generations back were middle-class tobacco farmers, who always owned property, and never were without resources, even in the depths of the first Depression. Inevitably, I was shocked to hear my daughter say that she really didn't want the responsibility. She's a confirmed renter.
So Barbara Kiviat's Time article made for thoughtful ruminating. Of course she emphasizes the dark side of homeownership, the all too apparent forclosures and walkaways and neighborhoods plagued by abandoned properties and plummeting home values. Thus, many of my friends, homeowners, have come to the conclusion that homeowning is liable not to be a very good investment for the coming decades.
Kiviat calls attention to the dark side of home ownership: it contributed to the hollowing out of cities, kept renters out of the best neighborhoods and fed America's overuse of energy. Most significantly, homeownership in recent years has made it very difficult for those who lost jobs to find another. They can't sell their house without losing much of their retirement, and they lack the mobility to search for jobs elsewhere. As a result they're caught. Of course, in places like Michigan and Nevada they're just walking away in search for jobs.
Two pieces of research on the subject are especially intriguing. An economist, Andrew Oswald, in studies dating fifteen years ago, found that in the U.K. that places with high homeownership rates seemed to have high rates of unemployment as well. That rings true in the U.S. Some of the highest cities with homeownership have stagnant Rust Belt economies: Detroit; Allentown, PA; Rochester, N.Y.; Akron, Ohio. In contrast, if you've spent much time in Europe, you know that there is a much higher rate of rental.
In a second study, Lawrence Katz of Harvard and Olivier Blanchard of MIT, found that it takes U.S. regions about six years to recover from a spike in unemployment. Americans are more prone to move in search of other jobs when faced with a downturn. Indeed, in a typical year nearly 40 million Americans move on to new areas in search of new opportunities. That is, they move is they can. If they're free to do so. And if, they're not burdened with a house that can't be sold because of market limitations. In today's economy, house mortgages can be a millstone.
So what's a Gen-Yer or Gen-Xer to do. Planning to someday own a home? I'd give that a serious second thought. Barbara Kiviat concludes her article with this: Stuck in her house in Maryland, unable to move for her husband's dream job in California, having spent thousands of dollars and countless hours on various home repairs, Jean Hartzell reflects on their decision to buy a house. "It's been a really big learning experience," she says. "I would say I'm glad that I did it." Then she stops. "I think I am. I'm not sure." When her friends tell her they're considering buying a house, she says, "You know, it's not what we were raised to think it would be."
Oh yeah. I've just finished the move from our large suburban home to an apartment, a mile closer to downtown Minneapolis. I'll tell you about the difficulties of that move and personal transition in the next week or so. Thus far, you should know, it's a very wise decision.