Home ownership has long been the foundation of The “American Dream.” This time ten years ago, the Dream was thriving. The housing market was booming and lenders could not give away mortgage loans quickly enough. Investing in houses, or investing in groups of people who were all investing in houses was seen as a fiscal “sure thing” with low risk and high return. Home prices could only continue to move up, or so it seemed. As mortgages continued to be lumped together into securities that Wall Street kept cranking out in ever increasing numbers, many folks who should never have received approval for loans were being approved in droves. “No-doc” loans (mortgages for which no documentation was required by the lender) and “liar loans” (mortgages in which the borrowers were not required to prove their income or assets) were rampant in the industry. A collective American sense of entitlement to home ownership was massively exploited, and led to one of the biggest fiscal crises of our country’s history.
In today’s economy, the thought of owning a home seems out of reach for many Americans. As a result of the decline of the single-family home market, demand for rentals has mushroomed over the past five years. This causes rental vacancies to drop and, in many markets, renting has actually become more expensive than owning. On the positive side, there are growing signs that the housing market is on the rebound in many areas; mortgage applications surged 23 percent last week alone. Consumer confidence is growing and so is builder confidence. This by no means suggests that we are at the beginning of another bubble; many people’s reduced incomes and/or damaged credit will keep them away from even considering home ownership for quite some time, but it is a good sign for the future.
The recent housing crisis was not an isolated event; it had been building for years. It’s easy to criticize banks and brokers for convincing people that they could afford a house way over their price range. People willingly signed loans, often knowing they were getting in over their heads, because they convinced themselves that they deserved it, and the mortgage lending industry went along with this self-deception. America used to be a place where “if you live here, and you work hard, you will be rewarded.” Somehow, that mentality slowly mutated into “if you live here, you will be rewarded.” Where did this entitlement come from?
Somewhere along the way many of us adopted the idea that everyone is a special, unique flower that can do no wrong. We have been raising our children in an environment where using red ink on tests is seen as damaging to their fragile egos, and where everyone gets a trophy just for showing up. This is not a sustainable practice; it teaches kids that they are special and deserve whatever they want even if they have not necessarily “earned” it. We used to tell our young girls to look up to the Amelia Earharts of the world, now we tell them to look up to the Kardashians, young women who accomplish nothing more than wearing fancy clothes and getting paid to go to parties. It is more important now than ever to get back on track, and to achieve the American Dream, doing it the right way.
If the dream of home owning dies, we die. We need to dream and dream big. However we need to realize that dreaming is only half of the equation, taking action is the other. Dreams provide the motivation to get up everyday and do our best. But we need to tread cautiously. We need to learn from our mistakes and invest in homes only when we can actually afford to do so. We need to start telling kids that they are special and unique, but that unless they work hard, no one will ever know how special they actually are. They must to be taught that you get what you earn in this world, not what you believe you deserve. Keeping the dream alive is more important than ever to prove that a great America has not just been a dream itself; it has and will continue to be a reality. If you’re thinking about home ownership, there are qualified people eager to show you how to do it the right way. At the end of the day we are not a nation of renters, we are a nation of owners