This Time We Are Sounding the Alarms
by Steve Harney on October 12, 2011
Occasionally, Steve Harney, our founder and lead content creator, asks us permission to share his personal feelings on a current real estate issue. Today is one of those times. – The KCM Crew
One of the things I often hear from people I meet is that real estate and mortgage professionals should have seen the current housing crisis coming and done something to prevent it. We should have realized that easing lending practices would lead to millions of families buying a home they could never afford. We should have warned our neighbors not to use their homes as ATMs. We should have realized that the economy could never withstand such growth and was about to crash.
Maybe these people are correct. Looking back, perhaps we could have been better stewards of the home buying process. We are committed to not making that same mistake again. Now, if we see a possible challenge in the future, we will speak up. That is what caused the writing of this blog post.
WE MUST SOUND THE ALARMS!
ALARM: Homeownership Percentage Has Dropped Dramatically!!
MSNBC.com, in an article entitled Housing Bust Worst Since Great Depression reported:
“The analysis by the Census Bureau found the homeownership rate fell to 65.1 percent last year… analysts say the U.S. may never return to its mid-decade housing boom peak in which nearly 70 percent of occupied households were owned by their residents.”
ALARM: People Are Losing Hope in the American Dream
In the same article, Patrick Newport, economist with IHS Global Insight is quoted saying:
“The changes now taking place are mind-boggling: the housing market has completely crashed and attitudes toward housing are shifting from owning to renting. While 10 years ago owning a home was the American Dream, I’m not sure a lot of people still think that way.”
ALARM: The Safety and Well Being of the Family Being Sacrificed
If we look at Fannie Mae’s quarterly National Home Survey, as far back as we can go, the top four reasons for buying a home are the same. The top four reasons people buy a home are:
- It means having a good place to raise children and provide them with a good education
- To have a physical structure where their family feels safe
- It allows for more space for their family
- It gives them control over what they do with their living space including renovations and updates.
Are children no longer important? Is safety less of a consideration today? Is the pride of homeownership soon to be forgotten? We must look at the long-range consequences of being a renters’ society.
ALARM: Building Family Wealth Being Threatened
Let’s look at homeownership as an investment. The Federal Reserve does a survey every 3 years. In 1998 the average Homeowner’s net worth exceeded that of renters by 31 times. In 2001 it was 36 times and eventually in 2007 it was all the way up to 46 times that of renters. Now, homeownership isn’t about a guaranteed financial short-term return – the market goes up, down and back up again. We have to be prepared for the long-term and a key component to wealth is homeownership. Even in these toughest of times, the wealth of the homeowner is over 30 times that of renters.
At a time when we are discussing the gap in wealth between the top 1% and the other 99%, how does the less fortunate paying rent to pay off the mortgages of the more fortunate make any sense?
Homeownership is important to the American family. If we lose this as a basic concept, what else do we lose? We didn’t realize the consequences when it was too easy to buy a house a few years ago and we are paying a price for that. We will pay an even larger price if we don’t realize the consequences of it being much too difficult for many to own a home today. SOUND THE ALARMS!