Sunday, May 15, 2011

Is home ownership overrated?

Smart Money recently wrote an excellent article that articulated the recent societal questioning of home ownership.

Home ownership – and mortgage payments – have long been regarded as the sacred cow of our society; an obligation used to justify our other financial decisions and the heart of empathy-inducing pleas (e.g., “I would quit, but I’ve got a mortgage to pay.”) It reigned as the pinnacle symbol of adulthood and was commended as a sound investment and source of moral virtue, stability and community.

But now, in the wake of the real estate crisis, people are looking around and wondering where we could have possibly gone wrong; how we could have let ourselves fudge the formula, only years after inheriting it from our parents and grandparents? Where did we go wrong at something made so perfect in their hands?

Real estate was always intended as a forced savings plan – and in times of social or economic unease, a vehicle whose attractiveness was rooted in its comparative stability. When the world was at war or consumed by inner-city crime, at least we had a home to which we could return at the end of the day. But, being little more than a forced savings account for the majority of home owners, it had little potential of upholding the standards of a true investment (outside of the housing boom.) Over the course of our nation’s history, homes earn their owners little more than inflation. You would likely fire a financial planner who, beaming, presented those kind of returns to you, promising you could expect the same return for 30 years.

And if the financial concepts of home ownership, once held as absolute truths, have come unraveled, logic dictates that the same must hold true for the social assumptions. While we idealized the white picket fence imagery – which conjured up sentiments of a happy home – the reality is that a home doesn’t always deliver the same happiness we were promised, especially if we can have it only by saddling ourselves with the stress of meeting hefty mortgage payments.

The Smart Money article:

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