“A dream house after all”?by Tim Manni
The bursting of the housing bubble and the continued drag it has placed on our overall economy has caused many of us to debate, or at least question, where we stand on the American dream and its relation to homeownership.
Late last year we wrote a post titled, “Is renting the new American dream?” A few months back we wrote about how “…the American dream of home ownership turned into a nightmare of debt and foreclosure” (a quote from David Wessel of the Wall Street Journal). Each of those posts questioned the old ideal that, as Americans, homeownership is something we all should strive for and is a gauge of our overall success. Maybe most of us are better as as renters as opposed to owners.
Yet a recent Op-Ed in the New York Times shines quite a bit more favorable light upon the benefits homeownership has to offer. Karl Case, professor and co-founder of the Case-Shiller housing index, writes that owning a home can be either a nightmare or the American dream, it just depends on how you look at it:
IF you read the coverage of the latest figures on the sales of existing homes from the National Association of Realtors, you may well have come to the conclusion that the American dream is dead. It is indeed worrisome that sales in July were down 25 percent from a year ago.
Depressing, yes — but the end of a dream? Not exactly. I have never quite understood what the American dream really means when it comes to housing. For some people, it means having a solid and fairly safe long-term investment that is coupled with the satisfaction of owning the house they live in. That dream is still alive.
Others, however, think the American dream is owning property that appreciates by 30 percent a year, making a house into a vehicle for paying bills. But those kinds of dreams have become nightmares for the millions of foreclosed property owners who have found themselves sliding toward bankruptcy.
But for people with a more realistic version of the American dream, buying a house now can make a lot of sense. Think of it as an investment.
If your intentions are good, Case says the benefits of buying a home, especially in today’s market, are quite abundant.
An investment that yields in two forms: Case used the example of Enron’s investors. When Enron went under, its investors were left with nothing. Whether the market goes up or down, as long as you continue to make your payments, you still have your investment, not to mention a place to live. Secondly, you may get capital gains from your sale — gains that are excluded from federal taxes (to a certain point).
Mortgage interest deduction: Each year, homeowner have the ability to deduct a portion of the interest that they pay on their mortgages.
Downturn has produced more buyer-benefits: 1) Low rates: borrowers coming into today’s market can take advantage of some of the lowest mortgage rates we’ve seen in five-plus decades. 2) Tax credit: the homebuyer tax credit offered buyers a tax break of up to $8,000. 3) Cheap real estate: While hurting many homeowners and sellers, falling home prices have made buying more affordable.
…housing has perhaps never been a better bargain, and sooner or later buyers will regain faith, inventories will shrink to reasonable levels, prices will rise and we’ll even start building again. The American dream is not dead — it’s just taking a well-deserved rest.
Readers: Do you think Karl Case is right? Is the American dream a matter pf perspective? In your opinion, is owning a home, or the idea of owning a home, a dream come true or a nightmare?