Reports of the death of homeownership are greatly exaggerated. The steady decline in housing values and in the percentage of households who own their home has prompted many to say the age of homeownership is over. The apparent waning has emboldened policy makers to attack mainstays such as the mortgage interest deduction and the federal government’s mortgage market support. But the perception is not fact.
A number of 2011 polls have come to opposite conclusions. In overwhelming proportions, Americans want to own their home and do not want to see existing housing tax incentives diminished. The NAHB hired two well-respected polling firms, one Republican and one Democratic, to conduct a national survey of likely voters on homeownership and housing policies. The poll was large enough to divide responses by geography and political sentiment. Consequently, the results can be considered non-partisan and reveal how different political spectrums feel about housing and homeownership.
The poll found that more people own a home than own a retirement account or stocks. Only savings accounts are more prevalent than homeownership. Of these assets, a home was rated as the best investment. Even two-thirds of the homeowners with an underwater mortgage felt a home is the best long-term investment and worth the risks. About three-quarters of current renters have homeownership as a life goal. The heavy support for homeownership spanned political party affiliation and congressional districts with new members of Congress and in likely close political races in 2012.
Sentiment against changing the housing tax incentives also exhibited the same cross-party solidarity. Likely voters are opposed to eliminating the mortgage interest deduction regardless of party affiliation or congressional district leaning. A majority was opposed to any limitations, including capping the deduction, limiting it for higher incomes or mortgage amounts, or taking away the second-home deduction.
Nine out of 10 view homeownership as part of the American dream, and about three-quarters would buy if they moved. A whopping 93 percent believe it is important to continue the mortgage interest deduction.
Fannie Mae has conducted a series of surveys on homeownership attitudes that also find solid support for owning. Its surveys found that investment in a home ranked above owning stocks or a tax-deferred retirement account. Less than one-third of renters expect to always rent.
Given the strong support for homeownership across a broad spectrum of demographic and political differences, why hasn’t the market recovered? The same surveys provide a hint. When asked if it was a good time to buy, the NAHB poll and the Fannie Mae survey found more than two-thirds believe now is a good time to buy. However, only 9 percent said yes when asked if it was a good time to sell. Among renters, the biggest barriers are down payment, job uncertainty, and credit qualification. Between repeat buyers’ unwillingness to sell and first-time buyers’ inability to get financing, sales and movement up the homeownership ladder appear stymied.
Usually, the past can give us some indication of future events. The Great Recession has no precedent, but we can observe what happened when regional house prices collapsed to see the effect. In general, those metropolitan areas that suffered significant and sustained house price declines also experienced a drop in homeownership that coincided with and continued beyond the price declines. Homeownership rates fell for two to four years after house prices began to recover but did eventually recover and exceeded past highs.
While the magnitude of house price disruption we’ve seen in this cycle is unprecedented, the strong homeownership preference exhibited in recent polls and the eventual reversal in homeownership in previous regional cycles provide strong evidence that homeownership rates will return, eventually.