Maybe home ownership is not right for most of of us

[MadeInTaiwan]

I recently read this interesting article in the Atlantic Monthly “How the current crash will reshape America” http://www.theatlantic.com/doc/200903/meltdown-geography/1 (Free registration might be required)

One main assertion is that future growth in the U.S. will be even more concentrated in the big regional hubs (Boston-NY corridor), (Souther Cal), (Bay Area), etc.

But what caught my eye was the following on page 6

“And while homeownership has some social benefits—a higher level of civic engagement is one—it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.”

This makes sense if you think of a Detroit as an extreme example. While the long term outlook in San Diego should be good as an outpost of the S. California mega region, owning still ties one down during periodic down turns.

If we believe that the trend towards people and jobs become more mobile as goods are today, then renting offers the flexibility of always being able to moving for better opportunities.

I’ve been advising my company’s new college hires against even thinking of buying. Now I have a more cohesive argument and might even be able to dig up some actual data to back it up.

MadeInTaiwan

[SanDiegoDave]

I think that’s simplifying it a bit – as well as playing a little loose with statistics. Go to a place like the central city of Milwaukee – where almost nobody owns property – and you’ll find massive unemployment, violence, drugs, crime, etc. Then go out to the suburbs where home ownership is much higher and you’ll find a completely different scenario. It has been that way through good and bad times. Yet, you still don’t see the folks in the worst neighborhoods moving out of state (or even out of that micro area) to find jobs.

Perhaps the problem with home ownership is the way it’s viewed and implemented in this country. Get rid of 30-year mortgages and the mortgage interest deduction for a start and I think we’d see a balancing out of the pros & cons of renting vs. owning. People would not be so stuck in one place for so long if nearby economic conditions tanked. And people would be less willing to view their primary residence as an investment and more of what it is: shelter.

[SanDiegoDave]

I think that’s simplifying it a bit – as well as playing a little loose with statistics. Go to a place like the central city of Milwaukee – where almost nobody owns property – and you’ll find massive unemployment, violence, drugs, crime, etc. Then go out to the suburbs where home ownership is much higher and you’ll find a completely different scenario. It has been that way through good and bad times. Yet, you still don’t see the folks in the worst neighborhoods moving out of state (or even out of that micro area) to find jobs.

Perhaps the problem with home ownership is the way it’s viewed and implemented in this country. Get rid of 30-year mortgages and the mortgage interest deduction for a start and I think we’d see a balancing out of the pros & cons of renting vs. owning. People would not be so stuck in one place for so long if nearby economic conditions tanked. And people would be less willing to view their primary residence as an investment and more of what it is: shelter.

[SanDiegoDave]

I think that’s simplifying it a bit – as well as playing a little loose with statistics. Go to a place like the central city of Milwaukee – where almost nobody owns property – and you’ll find massive unemployment, violence, drugs, crime, etc. Then go out to the suburbs where home ownership is much higher and you’ll find a completely different scenario. It has been that way through good and bad times. Yet, you still don’t see the folks in the worst neighborhoods moving out of state (or even out of that micro area) to find jobs.

Perhaps the problem with home ownership is the way it’s viewed and implemented in this country. Get rid of 30-year mortgages and the mortgage interest deduction for a start and I think we’d see a balancing out of the pros & cons of renting vs. owning. People would not be so stuck in one place for so long if nearby economic conditions tanked. And people would be less willing to view their primary residence as an investment and more of what it is: shelter.

[SanDiegoDave]

I think that’s simplifying it a bit – as well as playing a little loose with statistics. Go to a place like the central city of Milwaukee – where almost nobody owns property – and you’ll find massive unemployment, violence, drugs, crime, etc. Then go out to the suburbs where home ownership is much higher and you’ll find a completely different scenario. It has been that way through good and bad times. Yet, you still don’t see the folks in the worst neighborhoods moving out of state (or even out of that micro area) to find jobs.

Perhaps the problem with home ownership is the way it’s viewed and implemented in this country. Get rid of 30-year mortgages and the mortgage interest deduction for a start and I think we’d see a balancing out of the pros & cons of renting vs. owning. People would not be so stuck in one place for so long if nearby economic conditions tanked. And people would be less willing to view their primary residence as an investment and more of what it is: shelter.

[SanDiegoDave]

I think that’s simplifying it a bit – as well as playing a little loose with statistics. Go to a place like the central city of Milwaukee – where almost nobody owns property – and you’ll find massive unemployment, violence, drugs, crime, etc. Then go out to the suburbs where home ownership is much higher and you’ll find a completely different scenario. It has been that way through good and bad times. Yet, you still don’t see the folks in the worst neighborhoods moving out of state (or even out of that micro area) to find jobs.

Perhaps the problem with home ownership is the way it’s viewed and implemented in this country. Get rid of 30-year mortgages and the mortgage interest deduction for a start and I think we’d see a balancing out of the pros & cons of renting vs. owning. People would not be so stuck in one place for so long if nearby economic conditions tanked. And people would be less willing to view their primary residence as an investment and more of what it is: shelter.

[MadeInTaiwan]

You’re correct that home ownership => higher unemployment is oversimplification. There are issues of how strong is the correlation and the unproved suggestion of causation. For example, it might mean that high employment and high activity centers have higher cost of living (Like S.F. and N.Y.) and therefore smaller percent of home ownership. Maybe the population skews younger. I am assuming that the original statistics are correct (i.e. metropolitan areas with higher home ownership have higher unemployment).

Nevertheless, the article suggests that super high home ownership is not necessarily macro economically desirable.

Being a closet liberal/tree huger, I used think that mortgage interest deduction is a huge giveaway for consumption of the affluent even though I personally benefit from it. While there are social benefits and economical benefits for home ownership, I think a community is only marginally better off for having $1 million home owners vs. $250K home owners. It makes no more sense to have interest deductible above, say the greater metropolitan area medium, then have interest on any consumer spending deductible.

Of course, the current crash has taught me that policy that encourage the poor owning homes may not be in the best interest of the target group. This is similar to the poor saving for 401k or kids college while carrying credit car debt due all the “save for retirement/college” we drum into everyone.

At these times I can be momentarily persuaded that government simply does not possess the finesse required to craft an effective policy.

MadeInTaiwan

[MadeInTaiwan]

You’re correct that home ownership => higher unemployment is oversimplification. There are issues of how strong is the correlation and the unproved suggestion of causation. For example, it might mean that high employment and high activity centers have higher cost of living (Like S.F. and N.Y.) and therefore smaller percent of home ownership. Maybe the population skews younger. I am assuming that the original statistics are correct (i.e. metropolitan areas with higher home ownership have higher unemployment).

Nevertheless, the article suggests that super high home ownership is not necessarily macro economically desirable.

Being a closet liberal/tree huger, I used think that mortgage interest deduction is a huge giveaway for consumption of the affluent even though I personally benefit from it. While there are social benefits and economical benefits for home ownership, I think a community is only marginally better off for having $1 million home owners vs. $250K home owners. It makes no more sense to have interest deductible above, say the greater metropolitan area medium, then have interest on any consumer spending deductible.

Of course, the current crash has taught me that policy that encourage the poor owning homes may not be in the best interest of the target group. This is similar to the poor saving for 401k or kids college while carrying credit car debt due all the “save for retirement/college” we drum into everyone.

At these times I can be momentarily persuaded that government simply does not possess the finesse required to craft an effective policy.

MadeInTaiwan

[MadeInTaiwan]

You’re correct that home ownership => higher unemployment is oversimplification. There are issues of how strong is the correlation and the unproved suggestion of causation. For example, it might mean that high employment and high activity centers have higher cost of living (Like S.F. and N.Y.) and therefore smaller percent of home ownership. Maybe the population skews younger. I am assuming that the original statistics are correct (i.e. metropolitan areas with higher home ownership have higher unemployment).

Nevertheless, the article suggests that super high home ownership is not necessarily macro economically desirable.

Being a closet liberal/tree huger, I used think that mortgage interest deduction is a huge giveaway for consumption of the affluent even though I personally benefit from it. While there are social benefits and economical benefits for home ownership, I think a community is only marginally better off for having $1 million home owners vs. $250K home owners. It makes no more sense to have interest deductible above, say the greater metropolitan area medium, then have interest on any consumer spending deductible.

Of course, the current crash has taught me that policy that encourage the poor owning homes may not be in the best interest of the target group. This is similar to the poor saving for 401k or kids college while carrying credit car debt due all the “save for retirement/college” we drum into everyone.

At these times I can be momentarily persuaded that government simply does not possess the finesse required to craft an effective policy.

MadeInTaiwan

[MadeInTaiwan]

You’re correct that home ownership => higher unemployment is oversimplification. There are issues of how strong is the correlation and the unproved suggestion of causation. For example, it might mean that high employment and high activity centers have higher cost of living (Like S.F. and N.Y.) and therefore smaller percent of home ownership. Maybe the population skews younger. I am assuming that the original statistics are correct (i.e. metropolitan areas with higher home ownership have higher unemployment).

Nevertheless, the article suggests that super high home ownership is not necessarily macro economically desirable.

Being a closet liberal/tree huger, I used think that mortgage interest deduction is a huge giveaway for consumption of the affluent even though I personally benefit from it. While there are social benefits and economical benefits for home ownership, I think a community is only marginally better off for having $1 million home owners vs. $250K home owners. It makes no more sense to have interest deductible above, say the greater metropolitan area medium, then have interest on any consumer spending deductible.

Of course, the current crash has taught me that policy that encourage the poor owning homes may not be in the best interest of the target group. This is similar to the poor saving for 401k or kids college while carrying credit car debt due all the “save for retirement/college” we drum into everyone.

At these times I can be momentarily persuaded that government simply does not possess the finesse required to craft an effective policy.

MadeInTaiwan

[MadeInTaiwan]

You’re correct that home ownership => higher unemployment is oversimplification. There are issues of how strong is the correlation and the unproved suggestion of causation. For example, it might mean that high employment and high activity centers have higher cost of living (Like S.F. and N.Y.) and therefore smaller percent of home ownership. Maybe the population skews younger. I am assuming that the original statistics are correct (i.e. metropolitan areas with higher home ownership have higher unemployment).

Nevertheless, the article suggests that super high home ownership is not necessarily macro economically desirable.

Being a closet liberal/tree huger, I used think that mortgage interest deduction is a huge giveaway for consumption of the affluent even though I personally benefit from it. While there are social benefits and economical benefits for home ownership, I think a community is only marginally better off for having $1 million home owners vs. $250K home owners. It makes no more sense to have interest deductible above, say the greater metropolitan area medium, then have interest on any consumer spending deductible.

Of course, the current crash has taught me that policy that encourage the poor owning homes may not be in the best interest of the target group. This is similar to the poor saving for 401k or kids college while carrying credit car debt due all the “save for retirement/college” we drum into everyone.

At these times I can be momentarily persuaded that government simply does not possess the finesse required to craft an effective policy.

MadeInTaiwan

[sdduuuude]

Seems like a gross misunderstanding of the difference between “correlation” and “causality” to me.

[sdduuuude]

Seems like a gross misunderstanding of the difference between “correlation” and “causality” to me.

[sdduuuude]

Seems like a gross misunderstanding of the difference between “correlation” and “causality” to me.

[sdduuuude]

Seems like a gross misunderstanding of the difference between “correlation” and “causality” to me.

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