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Is Having A House Still The American Dream?
The American Dream Of Home Ownership Is Quickly
Becoming A Nightmare
January 10, 2012

Home ownership in America is becoming a nightmare for the average American. A college
education is still a dream. And working for the same company for 50, 40, or even 20 years is
a figment of one's imagination.

Education, permanent employment and home ownership all go together. It is hard to have
one without the other. A good education led to higher income, and this led to home
ownership. But as we look at the housing crisis, mounting student loan debt and
unemployment across the nation, it is difficult to see how we can get back to the "good old
days". In in last 2 years unemployment has moved from 9.1% to 8.5%. Many "would-be"
home buyers are still cautious and are waiting to ride out the recession before they commit to
purchasing a home.

Home ownership in the United States was 67.4% in 2009. In 1960 it was 62.1%. The best
year was 2004 when home ownership across the nation was at 69%. Home ownership was
most prominent in rural areas and the suburbs. Home ownership in these areas stood at 75%.

Income and Education.

Generally, home owners tend to have higher incomes than renters. Income is linked to social
status. Therefore, individuals with higher incomes tend to purchase larger and more
expensive houses. However, with the current housing crisis and economic recession, even
the higher income homeowners are facing foreclosures. Many are choosing a strategic
default rather than go through a foreclosure or short sale.

Low income individuals with less than a college degree are most likely to underestimate what
the change in interest rate can have on their mortgage. This lack of education played a role in
the sub-prime mortgage fiasco and the Adjustable Rate Mortgage (ARM). Many borrowers
did not fully grasp how the "teaser rate" worked, or how the "reset" had the potential of
doubling the mortgage payments.

The act of targeting low-income borrowers who have limited financial education, for
sub-prime loans, is definitely a form of predatory lending. As more houses are experiencing
negative equity, and neighborhoods are blighted with foreclosure and abandoned homes, we
are finally grasping the crime that was committed by some of the major banks.

At one time in American history, equity in the home was a way to finance the education of the
next generation. Now, with home equity being eroded by 21% or more across America, many
children will not attend college or university. The issue is further impacted by the rising cost of
a degree. Students that do go to college are burdened with loans of $50 thousand or more
when they graduate. The major disappointment is that there are limited job prospects upon
graduation.

The government has always held a policy that supported home ownership among all
Americans regardless of income levels or racial background. The government wants to keep
the "dream" alive. To this end the government sponsored enterprises, Fannie Mae and
Freddie Mac have made home ownership available to many who would not normally buy a
house. These two government entities are holding over $6.5 trillion in assets in order to
support this policy.

On a practical level, the dream of home ownership might have to skip a generation or two.
There is simply too much student debt.