Before the 1940s, homeownership was a fantasy for most Americans. Robert Lamont, President Hoover's Commerce secretary and the co-chairman of his Conference on Home Building and Home Ownership, lamented in 1932, "Without doubt, the major obstacle to an extensive increase in homeownership in this country is financial. The traditional single-family house handed down from our ancestors costs too much for the wage earner." In the decades that followed, government policies designed to lift the homeownership rate succeeded. But the Great Recession of 2007-09, which erased much of the recent gains in homeownership, has called into question whether Americans have become over-invested in the dream.
U.S. Homeownership Rate, 1890—2010
1890-1940: Urbanization and Depression
Homeownership declined in the opening decades of the 1900s as Americans left farms for the city. Mortgage financing was very limited, and down payments were high. After a surge in the 1920s, the Great Depression drove the homeownership rate to its lowest level of the 20th century. In 1903, Manhattan's Lower East Side was the
most densely populated place in the country.
1940-1990: Growth and Government
Beginning in 1934, the Federal Housing Administration's mortgage insurance eliminated the need for large down payments. Favoring the development of new single-family homes in the suburbs, the agency enabled 5 million families to purchase homes, through 1958. Tax breaks also helped. The cost of the mortgage-interest deduction constituted one of the largest tax expenditures in the federal budget by the time Congress required that it be published in the mid-1970s. Critics say that the deduction, which cost the government $80 billion in fiscal 2009, encourages Americans to buy large homes instead of, say, investing in business.
This 1,600-square-foot home built in 1934 in Morris County, N.J., was the first to receive FHA mortgage insurance. Now valued at almost $500,000, it was originally priced at $9,600—about $153,000 in 2009 dollars.
1990-2010: Boom and Bust
During the opening decade of the 21st century, credit became easier—too easy—to obtain. Previously unqualified "subprime" borrowers took on risky mortgages, some with no down payment or with an adjustable interest rate. Groups with historically low homeownership rates made gains, but when borrowers failed to make payments on those loans, a wave of foreclosures followed.
Americans homes have grown in size,
even as households have shrunk.
Owner-occupied units, in millions
Average number of people in household
Median number of rooms
Median floor area of new homes, in square feet
Median value (2009 dollars)
Sources: Census Bureau; Kenneth T. Jackson, Crabgrass Nation: The Suburbanization of the United States; Federal Housing Administration, The FHA Story in Summary: 1934-1959; fiscal 2012 budget; Journal of Industrial Ecology; National Archives.