Re-making the American Dream: changing housing decisions here and now.

• Author: Romerdahl, Andrew J.
• Position: REAL ESTATE

During the last ten years, the nation's rate of homeownership has steadily fallen from nearly 70 percent down to just over 64 percent. Homeownership's seemingly inseparable attachment to, or rather its entanglement with, the American Dream has sparked a number of debates concerning Americans' attitudes toward housing. What does this fall from grace say about the conventional dream of homeownership? What forces are really driving the numbers--personal desires or practical means? In other words, how are Americans make their housing decisions in today's climate?

Statistical Surprise

For a country that so embodies homeownership as a foundation of the American Dream, it might come as a surprise to some that the homeownership rate between 1900 and 1940 was roughly 45 percent. Deliberate government intervention raised this figure to more than 60 percent by the 1960s, and it has never dropped below that level since. This unprecedented spike can be contributed to a number of factors, including the introduction of tax incentives for homeowners, longer mortgage amortization periods (twenty-plus years), higher loan-to-value ratios (resulting in lower down payment requirements), the development of secondary mortgage markets, the introduction of mortgage insurance, incentive programs like the GI Bill (allowing for returning veterans to purchase a home with little to no equity requirements), and national marketing campaigns touting the economic and social benefits of owning your own home.

These political and monetary inducements drastically lowered the hurdle for home buying, and the rapid rise in homeownership rates indicates that there were many Americans eagerly willing to take advantage. This national experiment revealed that most Americans, given the opportunity and means, preferred to be homeowners.

Over the period of 1960 to 1990, the homeownership rate remained fairly stagnant, fluctuating slightly between 62 percent and 65 percent. In 1995, the federal government released its National Homeownership Strategy: Partners in the American Dream program. The goal of this initiative was to raise the homeownership rate to a new high of 67.5 percent by the year 2000. Like the efforts in the 1940-1960s, the administration advocated for relaxing lending requirements and lowering down payment and other mortgage costs. The strategy successfully reached its goal, and continued efforts eventually pushed the rate of homeownership to nearly 70 percent in 2004. Since this time, the homeownership rate has steadily decreased in spite of falling interest rates and stimulus efforts...