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Image courtesy of bestocproperties.com . Is Homeownership a part of the American Dream? Evaluation by Melanie Uribe March 13, 2013 Salt Lake Community College-English 2010. Is Homeownership a Part of the American Dream? .

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  1. Image courtesy of bestocproperties.com Is Homeownership a part of the American Dream? Evaluation by Melanie Uribe March 13, 2013 Salt Lake Community College-English 2010

  2. Is Homeownership a Part of the American Dream? Over 200 years ago, our Federal Constitution secured a fundamental element of our economy-property rights (Hughes & Cain, 2011). “Homeownership and decent housing are an essential part of the American Dream.” -1992 Clinton/Gore Campaign (Green & White, 1996, p. 442) Private ownership of property has long been described as the American dream. So, why ask this question now?

  3. In the wake of recent financial crises such as the housing market crash, many Americans are now questioning the reality of this dream. This is an important question because U.S. policy creators have always been willing to support this dream with public funding; seeing homeownership as a means to their policy ends (Green & White, 1996). “The Office of Management and Budget calculates that allowing owners to deduct property taxes and mortgage interest payments from taxable income cost the Federal Government $55 billion in foregone tax revenues in 1993..” (Green & White, 1996, p. 442).

  4. Perhaps this is because, for years, Americans have been bombarded with images of the ‘dream home’ with a white picket fence and happy family. As in this clip, we are often told about the many benefits of home ownership, and how important it is to achieving the American dream. Unfortunately, these images/messages are rarely accompanied by the data to back up their claims. In order to determine whether or not home ownership is really part of the American dream, we must first define the American dream. • http://www.youtube.com/watch?feature=player_detailpage&v=Md8-mebqTLg#t=0s

  5. The American dream:

  6. For the sake of this evaluation, I’ve condensed all of these into one definition: The American Dream: The opportunity for, and/or realization of, social and economic success sought by people in the United States.

  7. To answer whether homeownership is a part of this idea, we’ll use the following criteria that the definition entails, including claims made in the advertisement shown:

  8. Are there positive effects of home ownership on children? “A family that owns its own home takes pride in it…and has a more wholesome, healthful, and happy atmosphere in which to bring up children” –Herbert Hoover

  9. I found and reviewed two published studies examining such effects:

  10. *Green and White used three data sets to test whether or not children of homeowners stay in school longer than those of renters, and if daughters of homeowners were less likely to become teenage mothers than daughters of renters. *The focus was on 17 or 18-year-olds, as they’d been exposed to the most parental influence, but most likely still living with the parents. *All of the data sets supported their hypothesis that homeownership by parents is a significant determinant of children staying in school. Results also suggested that parents’ home owning reduces the chances of daughters having children by the age of 18. As the following table from their report shows, the effects are significant, especially for low-income households:

  11. Table 2: Predicted Probabilities of Children of Owners Versus Renters Staying In School (Green and White, 1996, p. 447)

  12. The authors of “The Impact of Home Ownership on Child Outcomes” chose to use a different approach in their study, using panel data to allow for “random effects” estimation, with a wider range of control variables. They tested for the direct and indirect impacts of homeownership on child outcomes; hypothesizing that investing in property leads to improved home environment, and knowing from prior research that the home environment is associated with child outcomes. • The study began in 1988 including children ages 5-8 with mothers ages 23-30. Two measures of cognition were used: reading recognition and mathematical achievement. Child behavior problems were measured through maternal reports which suggest possible bias, but are reported to be consistent with reports of other informants such as teachers and mental health professionals.

  13. The conclusion was that owning a home leads to a higher quality environment with better child outcomes than renting.

  14. Although both studies used very different approaches, both infer positive effects of homeownership on the social success of families. Based on such, I believe it meets the criteria of our first question. Also, as Haurin, Haurin & Parcel stated, literature suggests these results lead to higher education levels, greater future earnings, and less tendency to engage in deviant behavior; which brings me to our next item of criteria, the effect of homeownership on communities.

  15. Does homeownership improve our communities? • According to the research I’ve reviewed, the answer is a cautionary yes: • As home ownership rates greatly differ among communities, so do its social benefits. Neighborhoods with higher rates of home ownership have more access to economic and educational opportunities (National Association of Realtors, 2010). • Strong, consistent evidence shows homeowners are more likely to be satisfied with their neighborhoods, and participate in political activities (Rohe, Van Zandt, & McCarthy, 2001). As mentioned by the National Association of Realtors (2010), a study by Glaeser & DiPasquale

  16. With the national median home cost at $166,000 in 2010, even a 5% decline in home value will equal an over $8,300 loss for a typical homeowner. This means they have much more at stake in their neighborhoods than renters. This, and the right to pass property on to heirs, motivates them to spend more on maintaining their residence; therefore, contributing to the overall quality of the community around them (Rohe, Van Zandt, & McCarthy, 2001). • Homeowners have a lot more to lose to crime than renters as well. Property crimes result in financial losses to a home owning victim, while non-property violent crimes can impact property values of their entire neighborhood. Thus, there’s more incentive for owners to participate in crime prevention programs than there is for renters (Rohe, Van Zandt, & McCarthy, 2001).

  17. Though research tends to confirm an association between homeownership and neighborhood stability and socially desirable behaviors, it is not clear whether homeownership actually causes greater stability or whether those more likely to stay put are more prone to buying homes. It is pointed out that though policy-makers interpret research to suggest higher homeownership to increase economic and social benefits, these actions taken to promote neighborhood stability may be at the cost of individual mobility. This could result in trapping owners in distressed areas, rather than improving the environment for its residents (Rohe, Van Zandt, & McCarthy, 2001). This leads me to ask our next question..

  18. Is Purchasing a home a sound personal investment?

  19. As demonstrated by the graph below, even though many homeowners are still under water, they are moving towards positive equity (www.forbes.com, as contributed by Zillow, February 2013). Looking at the recent upward trends and considering its history, I believe the home-owning market will remain a positive investment despite the recent crash.

  20. The last question I’ve asked in evaluating homeownership as part of the American dream is: “Does the real estate market positively affect the U.S. economy?” • The effects of property ownership on the United States economy can be seen as far back as The Land Ordinances of 1785 and 1787. The nation’s future economic structure was at stake. As increases in land sales preceded boom increases in commodity prices and all other economic activity, declines in land sales also began before economic downturns. “It is an interesting historical and social fact that the business cycle appeared so early and with such power in our history in something so fundamental as the private occupation of public domain” (Hughes & Cain, 2011). • As recently as 2009, the housing sector directly still accounted for 14% of total U.S. economic activity (National Association of Realtors, 2010). Considering that the business of property ownership has played such a vital role for such a long time, I must answer “yes”.

  21. Conclusion Looking over all of the research found regarding the criteria, I believe it all supports the statement made by the National Association of Realtors (2010), “owning a home..is the aspiration of most American households. Homeownership..is the basis for a number of positive social, economic, family, and civic outcomes”. Hence, homeownership more than meets our definition of the American dream: The opportunity for, and/or realization of, social and economic success sought by people in the United States. “Two-thirds of all U.S. households who own their home currently are enjoying these benefits.. Home ownership has been an essential element of the American dream for decades and continues to be so even today” (National Association of Realtors, 2010, p. 14).

  22. References Green, R. K., & White, M.J. (1997). Measuring the Benefits of Homeowning: Effects on Children. Journal of Urban Economics , 41, 441-461. Haurin, D., Parcel, T., & Haurin, R.J. (2000). The Impact of Home Ownership on Child Outcomes. Social Science Research Network Electronic Paper Collection. Retrieved from http://papers.ssrn.com/paper.taf?abstract_id=218969 Hughes, J., & Cain, L.P. (2011). American Economic History: Eighth Edition. Boston, MA: Addison-Wesley. National Association of Realtors (2010). Social Benefits of Homeownership and Stable Housing. Retrieved from http://www.marealtor.com/content/upload/AssetMgmt/Documents/Consumer%20Resources/Social+Benefits+of+Stable+Housing.pdf Peterson, K. (2011). Home Ownership No Longer the American Dream? Retrieved from http://money.msn.com/home-loans/latest.aspx?post=dcc37877-7aa0-48ae-9ae1-2087b8264f9d Rohe, W.M., Van Zandt, S., & McCarthy, G. (2001). The Social Benefits and Costs of Homeownership: A Critical Assessment of the Research. Joint Center for Housing Studies of Harvard University’sLow-Income Homeownership Working Paper Series, LIHO-01.12. Zillow(2013). 2 Million Americans No Longer Plagued by Negative Equity. Retrieved from http://www.forbes.com/sites/zillow/2013/02/22/2-million-americans-no-longer-plagued-by-negative-equity/

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