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Magazine / Housing

A Solid Foundation

Why Americans still long for their own homes.

(David McNew/Getty Images)

Some Encouraging Signs for the President

The Heartland Monitor poll shows a slow warming trend toward President Obama.

Donna Korzun, a 55-year-old former occupational therapist in Dowagiac, Mich., has every reason to be disappointed with her roller-coaster ride through the real-estate market.

Korzun and her husband, a community-college music teacher, bought their modest Italianate house, built in the 1890s, for about $65,000 in 1996. Over the next decade or so, the two-story’s value doubled. But, today, with the economy in southwestern Michigan hurting (“We’ve lost every major employer”) and real-estate values declining almost everywhere since 2005, those gains all have melted away.

Now, she says, “my house is worth what I paid for it 15 years ago. I lost everything. I’m not upside-down, but I’m nowhere.” In fact, Korzun says that when you consider all the improvements that she and her husband made—such as the Civil War-era shutters that the family spent years painstakingly hand-painting with an artist’s brush—she would lose around $35,000 if she sold today.

 

And yet, Korzun says she’s still glad she and her husband bought the house. They raised three children and one grandchild there, and the home is rich in memories, if not equity. “We all shared that one bathroom for showers—and, you know what, we all lived,” she says. Ownership is deep in her family’s veins. Her mother is just now selling a farm that the family has worked since 1877 (and only because her health is declining), and Korzun’s in-laws have been in their home since 1950. “My dad would work in the factory all day and then I remember him plowing at night with the light on the tractor,” she says. “So I knew that’s the way you do it: Just don’t get grandiose ideas.”

Korzun’s experience highlights a central theme in the latest Allstate/National Journal Heartland Monitor poll, which explored Americans’ attitudes about homeownership. Even after a historic real-estate market upheaval that has sent foreclosure rates skyrocketing and housing values plummeting, home­ownership retains a powerful, almost tidal, grip on the American imagination.

New-home starts may be depressed to historically low levels, but most Americans still aspire to a place of their own. Roughly four-fifths of those who responded to the poll say they consider owning a home a better financial decision than renting; nearly nine in 10 homeowners say, like Korzun, they would buy their home again; and seven in 10 Americans say they would advise a friend or family member to buy a home as a good way to build long-term assets, even though many economists might differ.

Those results underscore the extent to which most Americans still believe that owning a home is the correct personal decision for themselves and their family. But the poll shows that the public is much more ambivalent about whether the nation’s focus on expanding homeownership remains a good thing for the country overall.

Infographic

Americans have traditionally seen home­ownership as a way to stabilize communities, but most respondents said they believed that the efforts to expand the dream have been destabilizing—by increasing foreclosures and burdening families with debt. And respondents divided exactly in half over whether the government should continue to promote homeownership with  policies ranging from the mortgage-interest tax deduction to Fannie Mae and Freddie Mac’s effective subsidies, or whether it should spend less money on those initiatives. Even about two in five homeowners say that Washington should revoke or retrench the mortgage deduction.

Korzun, despite all her affection for her own home, is one of many who wonder if Washington should ease off the push to encourage home­ownership that has characterized federal policy since the Depression. “Incentives for homeownership give people the false idea that government thinks I should buy a house,” she worries. And for those who are not “savvy starting out”—meaning most people, she believes—that assumption can lead them into dangerous waters. After the housing market’s wild recent ride, Korzun may be putting it mildly.

 

PRIVATE OPPORTUNITIES

The latest Allstate/National Journal Heartland Monitor poll is the eighth in a series exploring the ways that Americans are navigating the changing economy. The poll, conducted by Ed Reilly and Brent McGoldrick of FD, a communications-strategy consulting firm, surveyed 800 adults by landline and 200 more by cellphone from March 4 through March 8. It has a margin of error of plus or minus 3.1 percentage points.

Americans, the survey found, are relatively muted in their short-term economic expectations: Just 35 percent expect their finances to improve over the next year; 39 percent believe they will remain the same; and 23 percent believe they will deteriorate. That’s just a slight improvement over December’s Heartland survey, when 30 percent of respondents forecast improved conditions. Minorities are much more optimistic than whites. Among minorities, optimists outnumber pessimists by more than 4-to-1; whites divide equally between pessimism and optimism.

More-fundamental questions in the survey, though, revealed a broad instinct toward optimism—and Americans’ bedrock conviction that they control their own fate. Three-fourths of those surveyed said that it is still possible for people like them to achieve the American Dream, defined as the opportunity to advance as far as their talents will take them and to live better than their parents. Almost three-fifths of those surveyed said they are, in fact, living the American Dream. Likewise, nearly three-fifths said they believed that their own skills and hard work, rather than the overall state of the economy, would determine whether they achieve their goals. All of those findings echoed the powerful belief in individual opportunity evident in earlier Heartland surveys.

For most Americans, homeownership remains central to their definition of success. The survey offered respondents a list of aspirations and goals and asked how important they considered each to be in their interpretation of the American Dream. Homeownership ranked second, just ahead of being able to pursue a rewarding career, and just behind raising a family.

Infographic

A series of other questions underscored the persistent and broad appeal of homeownership as a personal goal. Nearly three-fourths said that owning a home “helps people live the American Dream” by providing a stable investment that they can pass on to their family; just 22 percent seconded the negative statement that homeownership impeded the American Dream by burdening people with debt or making it harder to move in search of opportunity.

Equally emphatic were the 70 percent of respondents who said they would advise a family member to buy a home, a number that swells to 76 percent among those who own a home today. Perhaps even more striking was that nearly nine in 10 homeowners said they would buy a home again if they had the chance; the number, incredibly, was unchanged among those who said that the value of their home has declined.

“People [bought] things they couldn’t necessarily afford.” —Heather Bendinelli, Sacramento, Calif.

The attraction of homeownership is rooted in the widespread, seemingly unshakeable, belief that owning is a better investment than renting. Although many economists disagree, nearly four-fifths of respondents said that even with all of the volatility in the housing market, owning makes better financial sense than renting. That belief spanned age, racial, and educational lines; more than two-thirds of renters said they considered ownership a better financial bet. On a separate question, about one-fourth of those polled picked homeownership as the best investment for their money—more than the number who picked saving in a bank or investing in the stock market, but fewer than those who chose investing in a retirement-savings program such as a 401(k).

Follow-up interviews with some of the poll’s respondents revealed seams in those attitudes. Especially among younger Americans, the sense has grown that homeownership is a more uncertain investment than it was for their parents. “It seems too risky,” said Justin Landers, a 29-year-old in Portland, Ore., who provides customer support at an online company. “Friends of mine that own houses seem to have to make compromises and work to make it work. It may be that I’m lazier or less ‘mature,’ but the benefits are less apparent to me right now.” Cherry McFarland, a 29-year-old student from Lemoore, Calif., whose husband is in the Navy, shares similar concerns. “I’m glad I rent,” she said. “I think that’s why people are in trouble today—because they took out so much money and couldn’t afford it.”

Many of those interviewed said that too many people buy homes without understanding the full costs involved, including taxes and upkeep. Still, all of these qualifications barely dent the sentiment, evident in interviews and in the survey itself, that owning offers a chance to build wealth while renting means squandering your money.

Liz Throm, a dental assistant in West Haven, Conn., echoed many of those surveyed when she said, “If you rent, it’s kind of like a bottomless pit; you’re putting your money into nothing.” Melissa Johnson, who works in customer service for a printing firm in Manor, Texas, initially resisted but ultimately decided to buy. “I was of the mind-set that I wanted to keep renting, because I didn’t want to pay taxes, didn’t want to pay for repairs,” she said. “But it’s really throwing money down a hole. I wanted to earn equity.”

The survey also underscored that many Americans develop an emotional attachment to their homes that separates it from any other investment. No one, after all, remembers what their 401(k) balance looked like on the day they brought a newborn home from the hospital. When asked the best reason to buy a home, almost as many people picked noneconomic as economic concerns. A combined 50 percent picked financial considerations (either getting the opportunity to build equity, making a good long-term investment, acquiring an asset they can pass along, or obtaining a tax deduction). But 48 percent picked social or cultural reasons, primarily acquiring a good place to raise a family.

In conversation, several of those surveyed described owning their own home in the same way Americans often talk about their cars—as a symbol of independence and autonomy. Bonnie Fairbank of Elmhurst, Ill., is renting now because her husband lost his job. But she’s eager to buy again. “In here, we can paint the walls, but there’s a lot of things we can’t do,” she says of her apartment. “In my house, we laid tile, we painted the rooms, we did a lot of things.” That instinct to leave a mark and put down roots is powerful: 60 percent of homeowners surveyed said they see homeownership primarily as a chance to settle down, compared with 36 percent who said they see it mainly as a way to build equity they can use to springboard to another home.

The durability of homeownership’s appeal is even more remarkable because so many Americans say that the downturn in housing prices has affected them. Almost one-fifth of those polled said that their home is underwater, meaning that they owe more than it is worth. Two-fifths said that the value of their home has decreased in the past several years, compared with one-third who said that theirs has stayed the same, and one-fourth who said that theirs has increased.

Infographic

The magnetic pull of ownership remains such that even two-thirds of homeowners who displayed some symptom of financial strain (such as an underwater mortgage) said that owning beats renting. A big reason may be that only one-third of all of those surveyed expect the housing market’s troubles to last for many years; nearly two-thirds said they think the crisis will ease in the next few. Over the white picket fence, it seems, the sun will always come out tomorrow.

 

PUBLIC COSTS

Although most Americans continue to see buying a home as the right personal decision, the poll reveals uncertainty that the nation’s housing policy should continue to rest on the foundation of promoting home­ownership. Perhaps too generously, those holding mortgages overwhelmingly view their own actions as responsible (only about one in 10 believe they took on too much debt to buy their home). But many clearly believe that a substantial number of other people behaved irresponsibly—and that government programs compounded the problem.

Fifty-two percent of respondents blamed banks and lending institutions that misled borrowers as the principal cause of the housing crisis, but one-third said that the biggest problem was that people bought homes they could not afford. Just about one in eight said that government policies were the main cause of the collapse, but only one-third believe that Washington’s response limited the crisis. Roughly an equal number said that the government’s response made things worse.

On a variety of other questions, respondents expressed unease about the consequences of the public and private efforts to expand ownership that raised the number of Americans who own their homes from 64 percent in 1993 to a high of 69 percent in 2004. (It now stands at 66.5 percent.)

A question that asked how the efforts to expand homeownership have affected communities elicited one of the most striking responses. Homeownership is often promoted as a way of solidifying neighborhoods by providing residents with a greater stake in the community. But only 42 percent of those polled said that the push to expand homeownership has created more stable communities (by encouraging residents “to become responsible and active citizens because they have a stake in their neighborhoods and communities”). A 51 percent majority said that the trend has made communities less stable because it “encouraged people to take on too much debt” and led to foreclosures that have disrupted neighborhoods. Minorities and renters were especially likely to hold that view, but narrow pluralities of both whites and homeowners seconded it as well.

Against that backdrop, respondents showed a substantial willingness to question long-standing federal policies meant to expand homeownership and lower its cost. Those surveyed split in half—with 46 percent on each side—on the broad question of whether Washington should continue or scale back its efforts to promote homeownership through policies such as tax incentives for first-time buyers and the mortgage-interest deduction.

Specific government policies drew substantial skepticism too. Exactly half of those polled said they wanted to retrench Fannie Mae and Freddie Mac—the giant quasi-federal agencies that buy mortgages and repackage them into securities—even if that meant more volatility “in the housing market and more expensive … mortgages for homeowners,” while 42 percent wanted government to continue its role in the mortgage market. Fifty percent said that Washington should maintain the tax break for mortgage interest, but 43 percent favored eliminating or limiting it. That’s much more skepticism than might be expected, given the mortgage deduction’s virtually sacrosanct position in the political debate.

Infographic

One reason so many of those polled might support reducing Washington’s role in home­ownership may be that so few Americans understand how they profit from it. Three-fourths of homeowners said they have not benefited from any federal program to promote ownership, even though 71 percent of those owners acknowledged that they take the mortgage-interest deduction.

Owners were slightly more supportive than renters of maintaining the tax deduction and the overall federal emphasis on promoting ownership. These questions tended to divide Americans mostly along familiar political lines, however. Whites, who consistently express more skepticism about federal activism than minorities, were more dubious of the federal role in housing; a plurality, for instance, said that Washington should spend less to encourage homeownership.

“I don’t believe everyone deserves to own a home,” said John C., a nuclear engineer from Wayne, Pa., who did not want to give his last name. “If you’ve earned it, yes. If you expect me as a taxpayer to buy you a home, I say, go to hell, quite frankly.” Heather Bendinelli, a lawyer in Sacramento, Calif., expressed a common worry among skeptics when she said she believed “some of the policies that have been in place led to people buying things they couldn’t necessarily afford.” Republicans were more willing than Democrats to roll back the overall federal role in housing and to limit Fannie and Freddie (although attitudes toward the mortgage deduction showed no partisan divide).

Minorities have achieved lower rates of homeownership than whites, and they remain much more supportive of federal intervention. Far more minority respondents (58 percent compared with 41 percent of whites) said that Washington should continue spending as much as it does now to promote ownership; and much larger percentages of minorities than whites backed both an aggressive role for Fannie Mae and Freddie Mac and the mortgage deduction. Minorities are also more optimistic than whites that the housing downturn is temporary.

For all the differences over public policy, the survey’s most powerful message remains the personal appeal of homeownership. Americans see it as a good investment, a source of stability in their financial lives, and a milestone in their progression into adulthood. Sixty percent of those polled agree that people who own a home are more financially successful than those who do not. Americans may have been chastened, and even scarred, by the housing-market mayhem, but the experience has done little to dim their yearning for ownership, well placed or not.

Perhaps most tellingly, four-fifths of those who are now renting said that it is important to them to one day buy a home; half of all renters expect to do so in the next five years. Typical of them is waitress Tracy Tucker.

Tucker lives in Las Vegas, the epicenter of the housing meltdown, where unfinished subdivisions sit as vacant as frontier ghost towns and real-estate values collapsed so completely that developers compare it to a natural disaster. But where others see cataclysm, Tucker, 35, sees opportunity: She believes it’s an ideal time to buy. “Since the crash, all these great prices are available,” she says enthusiastically. She is working with a lender to solidify her credit, hoping to qualify for a mortgage within the next year. “I am closer now than I have ever been before, because I’m willing to jump through the hoops,” she says. “The prices are so low, I’m willing to do whatever it takes.”

In America, the urge for a home to call your own remains a beating tide, and Tucker is another wave approaching the shore. 

Scott Bland contributed contributed to this article.

This article appears in the March 19, 2011 edition of National Journal Magazine.

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