The desire for home ownership is deeply rooted in the American spirit. The ideal of homeownership is such an integral part of the American Dream that its value for individuals, for families, for communities, and for society is scarcely questioned.
Owning a home embodies the promise of individual independence and of material and spiritual well-being. In addition to its functional importance and economic value, homeownership has traditionally conveyed social status and political standing. It is even thought to promote civic virtues.
Purchasing a home is the largest investment that most families will ever make. Homeownership has been called a “forced savings plan” in that an owner-occupant’s payments on mortgage principal are retained as equity in a comparatively non-liquid asset. Wealth is accumulated to the extent that the constant-dollar value of the owner’s equity exceeds any decline in the home’s value.
Accrued equity is only one potential financial benefit of homeownership. Buying a home with a mortgage is a leveraged investment. Many external factors can affect whether and at what rate a home’s value increases or decreases. Changes in interest rates influence demand for housing and its attractiveness relative to other investments. The dynamics of a particular housing market or the fortunes of a particular neighborhood can also be a strong factor of local home values. These external factors have never been as influential or apparent as they have been over the last several years. Leaving many hopeful homeowners at a more substantial distance to obtaining the American Dream.
Nonetheless, homeownership has become a critical factor in moving up the economic ladder. Home equity is the largest single source of household wealth for most Americans
Homeowners also enjoy important tax advantages. The value and distribution of Federal tax preferences for homeownership, such as the deductibility of property taxes and mortgage interest and the one-time exclusion of capital gains, are currently a matter of contentious debate.
With so many benefits of homeownership and over 86% of 18 to 34 year olds hoping to purchase a home it looks like our neighborhoods, communities, and families will be keeping the dream alive for years to come.
Sheri Aguilar is the president of the Lodi Association of Realtors and can be reached at Sheri@YourLocalAOR.com