It's Still Home, Sweet Home

Home values are down by about a third. Millions are scarred by foreclosure.  The cost of homeownership is rising. So why do most Americans still think that their homes are sweet investments?

The latest from the Pew Research Center is that 47% of homeowners have seen their houses lose value in the past five years. Another third think that their house values  have held steady. And an unshakably optimistic 17% think that their houses are worth more than they were five years ago.

Homeowners don’t expect things to get better soon. Of those who say their homes have lost value:

•  86% say they expect it to take at least three years for values to recover to pre-recession levels
•  42% say it will take at least six years
•  10% say it will take more than 10 years

So what? A huge majority – 82%  -- of the homeowners who say that their houses have lost value have not lost heart in homeownership as a wealth building tool.

• 37% believe strongly
• 45% agree

 that homeownership is the best long-term investment a person can make.

Logic indicates that the definition of ‘investment’ must have changed, because the numbers have gotten worse. The intangible attributes of homeownership – the solidity of owning the place that anchors your life – defies economic reality. Sometimes, common sense trumps charts. This is one of those times.  It’s home. And it’s an asset that delivers in ways that can never show up on a spreadsheet.

Image courtesy of Morguefile contributor jetolla.

Homeownership Needs No Defense -- At Least, Not This One

Irrational exuberance emanated from the National Association of Realtors’ just-concluded NARdigras conference in New Orleans. (We don’t want to know what the agents did to win beads.)

Everybody in sales is hardwired to be glass-half-full types. But the agents’ business model is broken. Their glass is cracked and leaking. They are not helping themselves by releasing chipper reports documenting the supposed investment value of homeownership….over this decade.

Here’s an excerpt from the just-released NAR Survey of Buyers and Sellers:

“Even with several years of price declines, the typical seller who purchased a home eight years ago experienced a median equity gain of $33,000, a 24 percent increase, while sellers who were in their homes for 11 to 15 years saw a median gain of 40 percent.”

In this one paragraph, the NAR glosses over eight years of losses. Nationally, home values have slid back to the 2002 level. And the slide is accelerating, according to this week’s Zillow report.

The American model of homeownership is crumbling. Nobody can afford to let an agent carry off their paltry equity. Homeowners cannot count on recouping the money they put into remodeling. Just yesterday, a prominent appraiser told us in an interview that no homeowner ever recaptures maintenance expenses. You bought the house with a roof. You sell the house with a roof. How much it costs you in between to keep a roof on the house is not an investment. It’s an expense.

We believe in homeownership. We believe that owning a home is a financial and social cornerstone appropriate for the majority of American families. Home equity anchors a secure retirement, can be tapped to start a business, and can serve as a source of emergency savings.

Buy a house for economic and family stability and self-determination. But don’t buy it counting on a juicy return.

The NAR should listen to its own customers, who agree with us. Its own survey found that the single biggest reason cited by homeowners for wanting to own a home is to ..own a home that is their own. Isn’t that enough? It is for us. Why isn’t it for the NAR?