Home Ownership & The American Dream
December 12, 2008
Part Three: What the Academic Research Shows.
In part one of this series, I described how the ability to engage in incredible financial leverage made marketing home ownership as an investment popular. In part two I laid out the logical reasons behind why it would not be personally advantageous to own a home. Today, I direct your attention to academic research that supports the idea that home ownership may be far from the American Dream.
Richard Florida points out a new report coming out of the Wharton School:
To me, this doesn't come as particularly surprising. Home ownership means being, more or less, locked into a neighborhood, even if it turns out to be a dud or fails to live up to expectations. Owning your own home also means dealing with inevitable maintenance problems, and keeping the home in tip-top shape, less it lose any of its resale value (or become illegal to resell at all). Considering that a lot of people have 100% or more of their equity tied up in an illiquid asset that requires constant upkeep in an always changing marketplace seems like it would be a bit stressful.
See Also:
Part One: How Did We Get Here?
Part Two: How Desirable is Home Ownership?
Part Four: Costs and Benefits to Society
In part one of this series, I described how the ability to engage in incredible financial leverage made marketing home ownership as an investment popular. In part two I laid out the logical reasons behind why it would not be personally advantageous to own a home. Today, I direct your attention to academic research that supports the idea that home ownership may be far from the American Dream.
Richard Florida points out a new report coming out of the Wharton School:
I find little evidence that homeowners are happier by any of the following definitions: life satisfaction, overall mood, overall feeling, general moment-to-moment emotions (i.e., affect) and affect at home… They are also more likely to be 12 pounds heavier, report lower a lower health status and poorer sleep quality. They tend to spend less time on active leisure or with friends. The average homeowner reports less joy from love and relationships… Contrary to popular belief, I do not find significant differences in family-related time use patterns, family-related affect, number of normal work hours, indicators of stress or measures of self-esteem and perceived control of life by homeownership…
Homeowners are happier on average only on an unadjusted basis. Once household income, housing quality and health are controlled for, they are no happier than renters. What’s more, they report to derive more pain from both the neighborhood and their house and home. This positive pain gap remains stable and robust when health, neighborhood characteristics and financial stress are controlled for. As for the most frequently cited channels of a positive impact by homeownership, namely self-esteem, stress, health and family life, again there is very little supporting evidence in my data… [H]omeowners spend less time on active leisure activities or with friends, which have been documented as some of the most enjoyable affective experiences.
To me, this doesn't come as particularly surprising. Home ownership means being, more or less, locked into a neighborhood, even if it turns out to be a dud or fails to live up to expectations. Owning your own home also means dealing with inevitable maintenance problems, and keeping the home in tip-top shape, less it lose any of its resale value (or become illegal to resell at all). Considering that a lot of people have 100% or more of their equity tied up in an illiquid asset that requires constant upkeep in an always changing marketplace seems like it would be a bit stressful.
See Also:
Part One: How Did We Get Here?
Part Two: How Desirable is Home Ownership?
Part Four: Costs and Benefits to Society
