Why Home Ownership Matters

Homeownership has always been a bedrock of the American dream. But the ongoing economic storm and its unmitigated effects have radically changed how many people are perceiving it. In 2010, even the media jumped on the bandwagon and questioned if home ownership was good for America. Since the real estate crash, housing gurus have been saying that the new norm of the future is less home ownership and more people renting. Other analysts are claiming there is no financial benefit in the long run to home ownership based on recent market drops and skyrocketing foreclosures.

Buying a home is one of the largest financial decisions most potential homeowners will ever make, and in addition to individual financial situation, emotion plays a big role in the buying decision. So let’s attempt to answer the question “if home ownership still matters?”

The largest tangible benefit to homeownership is building equity in the home. This can happen over time with price appreciation. In the economics of homeownership price appreciation is the dominant determinant. For most homebuyers, purchasing a home is not a short-term investment. The second biggest financial advantage of homeownership is tax benefits, which includes the ability to deduct the annual interest paid on a mortgage from income. There are other secondary tax advantages such as property tax deduction, deductible home buying expenses, tax free capital gains, etc.

Homeownership also has other distinct advantages, many of which may be emotional and not necessarily tangible. For some, home ownership provides a sense of stability and financial security for their children, and for others, it gives them the opportunity to establish family traditions. Many studies have documented the positive impact of home ownership on children, which include better health, fewer behavioral problems, higher achievement in math and reading, lower school dropout rates and higher high school graduation rates. Although the association of these outcomes with home ownership is debatable, some research has shown that home ownership has a measurable effect on children’s success.

Housing is a key driver of the American economy. It accounts for more than 15% of the national Gross Domestic Product. The housing market needs to be strong and sturdy in order for the U.S. economy to recover and remain healthy over the long term. Home ownership is an integral component of the American way of life and it also helps shape the financial fabric of the nation. While the merits of home ownership continue to be actively debated on blogs and by industry experts, most Americans believe that home ownership is still relevant and shall continue to be the biggest component of the American dream.